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Walden Bello - 2002
Walden Bello is a member of the House of Representatives of the Republic of the Philippines and president of the Freedom from Debt Coalition. A retired professor of sociology at the University of the Philippines, he is currently a senior analyst at the Bangkok-based analysis and advocacy institute Focus on the Global South. He is the author of 15 books, the most recent of which is The Food Wars.
The Twin Debacles of Globalization (January 2002)
It is said that in politics and in war, fortune smiles all too briefly. After allowing it to briefly savor the success of its Afghanistan campaign, history, cunning and inscrutable as usual, has suddenly dealt the Bush administration two massive body blows: the Enron implosion and the Argentine collapse. These towering twin disasters threaten to push the global elite back to the crisis of legitimacy that was shaking its hegemony globally prior to September 11.
Enron and the Corporate Con Game Enron forcefully reminds us that free market rhetoric is a corporate con game. Neoliberalism loves to couch itself in the language of efficiency and the ethics of the greatest good for the greatest number, but it is really about promoting corporate power. Enron lavishly extolled the so-called merits of the market to explain its success, but in fact, its path to becoming the US's seventh largest corporation was paved not by following the discipline imposed by the market but by strategically deploying cold cash, and lots of it. Enron literally bought its way to the top, throwing around hundreds of millions of dollars in less than a decade to create what one businessman described to the New York Times as the "black hole" of deregulated energy markets in which its financial shenanigans could thrive unchecked. To make sure government would look the other way and allow the "market" to have its way, Enron was generous with those willing to serve it, and few earned more Enron dollars than George W. Bush, who received some $623,000 for his political campaigns in both Texas and nationally from his friend Kenneth Lay, Enron CEO. The deep enmeshing of Bush and a number of his key lieutenants-Vice President Dick Cheney, Attorney General John Ashcroft, US Trade Representative Robert Zoellick, top presidential economic adviser Larry Lindsey, to name just the most prominent-in Enron's corporate web has shaken off George W's post-September 11 image of being President of all Americans and brought back the reality of his being the chief executive officer of corporate America. The Enron scandal pulls Americans right back to the bitter sozialepolitik of the nineties when, as Bush himself put it in his inaugural speech, "it seems we share a continent but not a country". It brings back the ideological context of the landmark electoral campaign of 2000 when Bush's fellow Republican, John McCain, made an almost successful bid to become the presidential standard-bearer by focusing on one issue: that the massive corporate financing of elections that had transformed US democracy into a plutocracy was gravely undermining its legitimacy. Globalization and Corruption Corporate-driven globalization, we have always held, is a process that is marked by massive corruption and one that is deeply subversive of democracy. Shell in Nigeria was a good case study. Scores of TNCs and the World Bank were implicated with the Suharto political economy in Indonesia. Now Enron strips the veil from what Wall Street used to call the "New Economy", which showered rewards on sleazy financial operators like Enron while sticking the rest of the world with the costs, not least of which is what is shaping up to be the worst global downturn since the 1930s. Which is why we have always told World Bank types who want to lecture us on good governance that they should first tell Washington to get its house in order. Corporate corruption is central to the US political system, and the fact that it is legal and assumes the form of "campaign finance" funneled to politicians by "political action committees" does not somehow make it less immoral than "crony capitalism" of the Asian variety. Indeed, corruption of the Washington variety is much more damaging because momentous decisions purchased with massive cash outlays have not only national but global consequences. Corrupt Third World politicians ought to be hung, drawn, and quartered, but let's face it, the amounts of cash and the quotient of power they deal in are peanuts compared to the scale of influence peddling in Washington. Argentina and the Folly of Liberalization If Enron illustrates the folly of deregulation cum corruption, Argentina exemplifies that of another facet of the corporate globalist project: the liberalization of trade and capital flows. $140 billion in debt to international institutions, its industry in chaos, and an estimated 2000 people daily falling below the poverty line, Argentina is in a truly pitiable state. Argentina brought down its trade barriers faster than most other countries in Latin America. It liberalized its capital account more radically. And in the most touching gesture of neoliberal faith, the Argentine government voluntarily gave up any meaningful control over the domestic impact of a volatile global economy by adopting a currency board, that is, pegging the peso to the dollar. Dollarization, some technocrats promised, was right around the corner and, when that happened, the last buffers between the local economy and the global market would disappear and the nation would enter the nirvana of permanent prosperity. The Summer's Doctrine All of these measures were taken either at the urging of or with the approval of the US Treasury Department and its surrogate, International Monetary Fund. In fact, in the wake of the Asian financial crisis, when capital account liberalization was increasingly seen by most observers as the villain of the piece, Larry Summers, then Secretary of the Treasury, extolled Argentina's selling off of its banking sector as a model for the developing world: "Today, fully 50 per cent of the banking sector, 70 per cent of private banks, in Argentina are foreign-controlled, up from 30 per cent in 1994. The result is a deeper, more efficient market, and external investors with a greater stake in staying put". The Argentine technocrats seemed determined to outdo their Chilean rivals in their obeisance to the market-interestingly enough, just as the Chileans were beginning to question its efficacy in the volatile area of capital flows. As the dollar rose in value in the mid-1990s, so did the peso, making Argentine goods uncompetitive both globally and locally. Raising tariff barriers against imports flooding in was regarded as a no-no. Instead, borrowing heavily to fund the dangerously widening trade gap, Argentina spiraled into debt and the more it borrowed, the higher the interest rates rose as creditors grew increasingly alarmed at the consequences of the unbridled market freedom they had benefited from initially. Contrary to Summer's doctrine, foreign control of the banking system was no. In fact, foreign control simply facilitated the outflow of much needed capital by banks that became increasingly reluctant to lend to both government and local businesses. With no credit, small and medium enterprises, and not a few big ones, closed down, throwing thousands out of work. Wrong Prescription, Again Cap in hand, Argentina went to its mentor, the IMF, for a multi-billion dollar loan to meet payments on the $140 billion external debt coming due. The Fund refused unless the government made swingeing cuts in public expenditures and imposed a tight money policy. As Joe Stiglitz has noted, this was precisely the mistake the IMF made in Asia in the wake of the financial crisis: instead of reflating the economy, the IMF imposed an inflation-fighting program that accelerates the contraction of the economy. It seems that the Fund is institutionally-and intentionally-incapable of learning from its mistakes, and Argentina is one more reason why it should be abolished. Reginald Dale, the doctrinaire free-market columnist at the International Herald Tribune worries that the Argentine debacle may have negative consequences beyond Argentina, chief of which are the erosion of the legitimacy of the globalization project and a resurgence of populism, making it impossible for the Bush administration to bring to a successful conclusion Washington's projected Free Trade Area for the Americas (FTAA). It is up to the movement against corporate-driven globalization to prove Dale and the Wall Street-Washington-Houston mafia right, and not only in Latin America. The debacles of Enron and Argentina are so clear in their causes and so easily explained to ordinary people throughout the world that they provide the perfect handle with which the movement can regain globally the momentum it lost on September 11. As they say in Texanese, "let's git 'em buzzards". Porto Alegre Social Summit Sets Stage for Counteroffensive Against Globalization (January 2002)
Porto Alegre is not exactly a Third World city. Located in one of Brazil's more prosperous states, Rio Grande do Sul, and populated by people mainly of European stock, this city of 1.2 million people is First World when it comes to infrastructure and social services. In fact, it ranks near the very top in terms of the country's "quality of life" index.
"Another World is Possible" Yet Porto Alegre, site of the World Social Forum (WSF) last year and again this year, has become the byword for the spirit of the burgeoning movement against corporate-driven globalization. Galvanized by the slogan "Another world is possible", some 70,000 people are expected to flock to this coastal city from January 30 to February 4. This figure is nearly six times that for last year. Fisherfolk from India, farmers from East Africa, trade unionists from Thailand, indigenous people from Central America will be among those making their way to Porto Alegre. But there will also be a sizable contingent of people from the Northern countries. And the place will be graced by personalities who have come to exemplify the diversity of the movement against corporate-driven globalization-among others, activist-thinker Noam Chomsky, Indian physicist-feminist Vandana Shiva, Canadian people's advocate Maude Barlow, and Egyptian intellectual Samir Amin. Counterpoint to Davos The World Social Forum emerged as a counterpoint to the World Economic Forum, the annual gathering of the global corporate crowd in Davos, Switzerland. Proposed by a coalition of Brazilian civil society organizations and the Workers Party that controls both Porto Alegre and the state of Rio Grande do Sul, the idea triggered strong international support from organization such as the French monthly Le Monde Diplomatique and Attac, an influential Europe-wide organization supporting a tax on global financial transactions, and received financial support from progressive donors like Novib, the Netherlands Organization for International Development Cooperation. Driven by this energy, the first WSF was put together in a record time of eight months. A televised trans-Atlantic debate between representatives of the WSF and some luminaries attending the WEF was billed by the Financial Times as a collision between two planets, that of the global superrich and that of the vast marginalized masses. The most memorable moment of that confrontation came when Hebe de Bonafini, a representative of the Argentine human rights organization Madres de la Plaza de Mayo, shouted at financier George Soros across the Atlantic divide: "Mr. Soros, you are a hypocrite. How many children's deaths are you responsible for". Since its first meeting the stock of the WSF has risen while that of the WEF has fallen. "Already put on the defensive as a gathering to 'discuss how to maintain hegemony over the rest of us", as one of the debaters on the WSF side put it, the WEF received a further blow when it was forced to hold its 2002 meeting away from Davos since the Swiss government could no longer guarantee the security of its corporate participants. Providing protection for WEF 2001 had necessitated the country's largest security operation since the Second World War, and this provoked cries of protest from within Switzerland. Thus, the WEF has moved to New York for 2002, and it is not clear when and if it will return to Davos. But as observers point out, "a great part of the attraction of the WEF is the 'ambience' of Davos as a retreat high up in the Swiss Alps. Without this, it is headed for oblivion". The centerpiece of this year's gathering in Porto Alegre are 26 plenary sessions over four days structured around four theme: "the production of wealth and social reproduction", "access to wealth and sustainable development", "civil society and the public arena", and "political power and ethics in the new society". Around this core will unfold scores of seminars, a people's tribunal on debt sponsored by Jubilee South, and about 5,000 workshops. Marches and demonstrations of workers and peasants are also expected, led by the Brazilian mass organizations CUT (Central Union of Workers) and MST (the Movement of the Landless) that are among the key organizers of the WSF. Tumultuous Year The anti-establishment forces gather in Porto Alegre after a tumultuous year. Perhaps the apogee of the anti-globalization movement came during Group of Eight Meeting in Genoa in the third week of July, when some 300,000 people marched in the face of police tear-gas attacks. Shortly after the Genoa clashes, in which one protester was killed by police, there was speculation in the world press that elite gatherings in non-authoritarian countries might no longer be possible in the future. And indeed, Canada's offer to hold the next G8 meeting in a resort high up in the Canadian Rockies in the province of Alberta seemed to confirm the fact that the global elite was on the run from the democracy of the streets. Then came September 11, which stopped a surging movement dead in its tracks. The next big confrontation between the establishment and its opponents was supposed to take place in late September in Washington, DC, during the annual fall meetings of the World Bank and the International Monetary Fund. Unnerved by the prospect of a week of massive protest that was expected to draw some 50,000 people, the Bretton Woods twins took advantage of the September 11 shock to cancel their meeting. Without a target and sensitive to the sea change in the national mood in the US, organizers cancelled the protest and held a march for peace instead. The establishment followed up on the unexpected opportunity to reverse the crisis of legitimacy that had been wracking it prior to September 11 by pressing the developing countries to approve a declaration launching a limited set of trade negotiations during the Fourth Ministerial of the World Trade Organization (WTO) in Doha, Qatar, in mid-November. Third World governments were told that unless they agreed to talks leading to greater liberalization, they would have to take responsibility for worsening a global recession that had been accelerated by the World Trade Center attack. Taking no chances, the WTO secretariat and the Qatar monarchy had worked to limit the number of legitimate NGO's attending the meeting to about sixty. This ensured that the massive demonstrations on the street that characterized Seattle, which had served as a context for the famous developing country revolt at the Sheraton Convention Center, were not present in Doha, and under these circumstances, developing country opposition collapsed. Reversal of Fortune Had the WSF meeting been held in late November of December, the mood of people coming would have been different. The Bush administration would have been riding high after its devastating triumph in Afghanistan. However, in the last few weeks, history, cunning as usual, has dealt Washington two massive body blows: the Enron debacle and Argentina's economic collapse. Enron has become the sordid symbol of the volatile mixture of deregulation and corruption that drove the US' "New Economy" in the 1990's and helped lead it to what is possibly the worst global recession since the 1930's. Burdened with an unpayable $140 foreign debt, its industry in chaos, and 2,000 of its citizens falling under the poverty line daily, Argentina serves as a cautionary tale of the disaster that awaits those countries that take seriously the neoliberal advice to liberalize and globalize their economies. As the WSF opens, these twin disasters have brought back with a vengeance the crisis of legitimacy that the global elite and its project of corporate-driven globalization were experiencing prior to September 11. Porto Alegre provides the perfect site and the perfect moment for the counter-offensive on the part of the movements that believe that "another world is possible". A "Second Front" in the Philippines (18 March 2002)
The Bush Administration's opening of a so-called second front against terrorism in the Philippines has stunned people here with its swiftness. Less than three weeks after the decision was jointly announced by Washington and Manila in early January, the first wave of US troops landed in Zamboanga City, about 460 nautical miles south of the Philippine capital. The reality of this new front in another distant land was brought home to many Americans by the crash of a US helicopter in treacherous waters on February 22. Officially tagged an accident, the tragedy took the lives of ten US soldiers, eight of whom belonged to an elite Special Forces unit.
Not surprisingly, the national debate in the Philippines, which a decade ago closed down two massive US bases it had hosted, has turned ugly very quickly. President Gloria Macapagal-Arroyo has taken to calling opponents of the deployment "anti-Filipino" and "Abu Sayyaf lovers", referring to the terrorist group that is ostensibly the target of the mission, while critics have warned that the decision will precipitate the downfall of her administration. In one of those quicksilver transformations for which Philippine politics is famous, ex-senator Juan Ponce Enrile, widely regarded as the man who torpedoed the impeachment proceedings against former President Joseph Estrada a year ago, is now feted in some quarters as a nationalist for his public stand that the deployment violates the Philippine Constitution. The US plan calls for the immediate deployment of 660 troops in western Mindanao. Some 160 of these are members of the Special Forces, who are to be assigned to the war-torn island of Basilan, about seventeen miles southwest of Zamboanga, in what is being labeled a "training exercise" with 3,800 Filipino troops. Two advisers will be assigned to each company of 100 soldiers engaged in a search-and-destroy mission against the Abu Sayyaf. These advisers are not supposed to engage in combat, though the terms of engagement allow them to fire in self-defense. Even before the operations are under way, however, controversy already attaches to the issue of who will command these advisers. The Philippine government said Philippine Army officers would exercise authority over the US troops, while the Pentagon insisted that its soldiers would not function under foreign command. Not surprisingly, the Pentagon won, with the final terms of reference, released on February 12, setting forth a potentially messy dual command structure in actual field operations. But that is a minor tempest compared with the larger issue of whether the US advisers should be in the Philippines at all. The deployment clearly violates the Philippines' 1987 Constitution, which says that no foreign troops are to be allowed in the Philippines except under a treaty. The one full-fledged treaty the Philippines has with the United States, the cold war-era US-Philippine Mutual Defense Treaty of 1951, commits the two governments to jointly repelling external aggression aimed at each other, while the Visiting Forces Agreement, signed in 1998, legalizes and regulates US participation in military exercises designed to counter external attack. Neither allows the use of foreign troops in quelling local insurgencies or criminal activities like the Abu Sayyaf's kidnapping spree. The Abu Sayyaf was created in the early 1990s by young Islamists alienated from the two big rebel groups fighting for independence for the Muslim people of the Philippines, the Moro National Liberation Front and the Moro Islamic Liberation Front. The MNLF was regarded as too secular and the MILF as not fundamentalist enough by the Abu Sayyaf founders, who wanted to bring all Muslims in Mindanao-the country's second-biggest island-under an Islamic state where Muslims would be able to practice Islam in its "purest and strictest form", as its key intellectual, the now-deceased Aburajak Janjalani, put it. Many people in Mindanao, however, are skeptical about the ideological protestations of the Abu Sayyaf. Some regard it as just another of western Mindanao's numerous bandit groups, whose invocation of Islam is designed to confer respectability on its criminal activities. Others see it as a creation of the Philippine military originally designed to weaken the MNLF and MILF but that, like Frankenstein's monster, evolved beyond the control of its minders. The kidnappings for ransom that the Abu Sayyaf engages in are not what makes it unique-such kidnappings are a dime a dozen throughout western Mindanao-but rather their spectacular character. It made millions of dollars in ransom money after it hit the resort island of Sipadan two years ago and made off with a multinational set of victims it kept as hostages for months. Hardly had that shock worn off than it snatched more than a dozen guests and workers from the Dos Palmas resort on the island of Palawan last May and ferried them in high-speed boats to Basilan, more than 300 miles away. This time, there were three American captives, missionary couple Gracia and Martin Burnham of Kansas and Guillermo Sobero of California. Sobero was beheaded early on, while the Burnhams are still in the Abu Sayyaf's hands, along with Filipina nurse Deborah Yap. Philippine security officials claim that links were forged in the early 1990s between representatives of Osama bin Laden and the Abu Sayyaf. However, not even President Arroyo claims there is evidence that ties continued after 1995. Some Southeast Asian police investigators have, in fact, suggested that people suspected of being agents of bin Laden's Al Qaeda organization, such as Farathur Raman Al Ghozi, a recently arrested Indonesian accused of a number of bombings, have ties to the insurgent MILF rather than to the Abu Sayyaf. Why the Philippines? So why rush to the Abu Sayyaf stronghold of Basilan? Undoubtedly, a key incentive for President Arroyo is the aid that Washington has promised her administration in return for her declaration of fealty to President George W. Bush. About $100 million in military aid has been committed to the badly underfunded Armed Forces of the Philippines. Even more critical are the billions in economic aid and foreign investment promised by Washington and Wall Street during Arroyo's visit to the United States last November. The centerpiece of her program to jump-start the Philippine economy during this period of global recession is massive economic support from Washington. For her, the global antiterrorist campaign is first and foremost a business proposition, and she made this very clear when she emerged from her meeting with President Bush in Washington in November and boasted to Filipino reporters that "it's $4.6 billion, and counting". Beyond the promise of massive aid, President Arroyo perceives a positive political fallout from the coming of the Americans. She is banking on the popularity of a hard line against the Abu Sayyaf among Mindanao's Christian majority. This group enthusiastically supported the aggressive military campaign against the MILF launched by Arroyo's predecessor, Joseph Estrada. Although Estrada was ousted by a middle-class-based popular uprising in January 2001, the Christian majority still voted overwhelmingly for his allies during the congressional elections last May. Arroyo figures that bringing in US troops to stiffen a badly performing Philippine Army will bring a significant bloc of votes over to her side in time for the 2004 presidential elections. "I wish the administration would just say that it is basing its decisions on what it thinks is the popular mood rather than attempting the impossible-trying to prove that the American troop deployment is constitutional and legal", says Wigberto Tanada, a former senator who is the main convener of an anti-interventionist alliance called Gathering for Peace. When it comes to Washington's motives, many here see the Bush Administration's choice of the Philippines as a second front in its global antiterror campaign as having been made in haste and as the result of a process of elimination. Somalia evokes memories of the disastrous 1993 Ranger raid that led to the withdrawal of US troops; Yemen and Sudan are unknown, forbidding territory; and action against Iraq is-at least for now-precluded by the absence of consensus among the key policy-makers. In these circumstances, the Philippines-with a fiercely supportive head of state, being a former colony and possessing a familiar culture-stood out. Representative Etta Rosales of Akbayan (Citizens Action Party), one of the country's most respected legislators, feels there is an even deeper reason: In her view, the United States has been pushing hard to reintroduce a US military presence in the Philippines ever since it lost its bases in 1991. An effort to push through an Acquisition and Cross Servicing Agreement similar to that negotiated with Japan met strong opposition both in and out of government in the mid-1990s. Strong lobbying by the Pentagon, however, produced the Visiting Forces Agreement in 1998, which reopened the gates through which US troops poured in under the guise of conducting military exercises with their Filipino counterparts. Exercises normally have had a duration of a few weeks. But the 2002 "Balikatan" (Shoulder-to-Shoulder) Exercise in Basilan is projected to last six months, and its aim, suspects Rosales, is to lay the ground for a longer-term and more intensive military presence. "They were simply waiting for the perfect moment, and the Abu Sayyaf's alleged links to Al Qaeda provided the perfect excuse", she contends. The Caldron of Basilan The US Special Forces will find their Filipino allies demoralized by antiquated and inadequate equipment and very low pay. Probably the only reliable fighting unit in the armed forces is the Marines. The army's reputation is so bad that many residents of Basilan swear that a few months ago, the Abu Sayyaf were able to break out of encirclement in the town of Lamitan by paying off the Scout Ranger units that had the bandits and their hostages in their grip. The biggest problem that the Special Forces will face, however, is Basilan itself; as journalists Marites Vitug and Glenda Gloria put it in their Under the Crescent Moon: Rebellion in Mindanao, Basilan, an island of some 1,370 square kilometers, is a "war laboratory", where "battalions of young soldiers are trained to become tough and where senior military officers are stationed before they are promoted". Its literacy rate is the lowest in western Mindanao, and half the population lives in poverty. Basilan's social history is a microcosm of forces that have transformed the region of Mindanao and made it a land of permanent war. Muslims belonging to the Yakan ethnolinguistic group form the majority, but large numbers of them have been dispossessed by a migrant Christian population that streamed into the island with the logging concessions, agribusiness firms and multinational corporations, some of which arrived as early as eighty years ago. José Torres Jr., a specialist in Basilan society, estimates that today Muslims constitute 71 percent of the population but Christians own 75 percent of the land, with ethnic Chinese controlling 75 percent of local trade. The result is a combustible mixture that has produced unending streams of resentful recruits first for the MNLF, then for the MILF and the Abu Sayyaf. Until now, the Abu Sayyaf, which is estimated to number from a few hundred to a thousand in western Mindanao, never had a significant mass base in Basilan. But recent military actions, like the arrest of scores of Muslims on such flimsy grounds as being related to suspected members of the terrorist group, is creating precisely that base. While Christians favor the Americans' coming, Angelina Ludovice, a respected community organizer in Isabela, the provincial capital, warns that "Muslims now see the whole thing as directed at them". Unlike Afghanistan, Basilan is a typical setting for an insurgency: Forests and communities overlap, creating both physical and popular cover for combatants. The hunt for combatants easily leads to abuses against civilians, turning many into insurgents. Yet while the insurgency has a mass base, so does the counterinsurgency, for the place is riven by a deep ethnic and religious divide that continually threatens to produce communal bloodshed. Now with the threat it poses of tilting the balance of forces sharply in favor of the central government, the military and the Christian community, US intervention may yet accomplish what has so far eluded the Muslims: an operational unity among the rival organizations of the Abu Sayyaf, the MILF and the MNLF. There is, however, one thing that Christians and Muslims share, and that is the fear of bombing. Both communities, says Ludovice, know about the intense bombing that accompanied the Afghanistan campaign, and they worry that the same thing can happen in Basilan. So far, news about what the Americans will bring to the training refers to infantry tactics, lessons in night-flying, skills in night-fighting with night-vision goggles and sophisticated surveillance work. What made the difference in Afghanistan, however, was precision bombing, and it is hard for many Filipinos to believe that massive air power will not be employed against suspected Abu Sayyaf strongholds. With Basilan's ecology of overlapping forests and communities, the results of such a campaign could be devastating in human terms. In short, the slightest acquaintance with Basilan's tortured history reveals the folly of the US deployment. For even if the Special Forces and their protégés do decimate the Abu Sayyaf, the unchanged conditions of ethnoreligious discrimination, inequality and poverty will continue to breed extremist responses. Only an aggressive program of social and economic reform will break the cycle of injustice and terrorism. The Americans may leave after six months, but it will be the locals who will be left with managing a situation that is worse than before. The Manila Scene As in Basilan, things are coming to a head in Manila. Seemingly confident just a few weeks ago, President Arroyo is now prone to utter sharp words about her critics in public. There are now daily demonstrations at the US Embassy, and on February 11, Gathering for Peace, perhaps the most powerful coalition of opponents of the US troop deployment, was born. Scores of people at the event sang "Bayan Ko" (My Country), the melancholic theme song of the struggle to oust the US military bases in the late 1980s and early '90s. One of the leaders of that campaign, Professor Roland Simbulan of the University of the Philippines, told the crowd, "We're in the minority now. So what's new? We were also in the minority at the beginning of the anti-bases campaign, but in the end we built up a solid patriotic majority". While Gathering for Peace was being launched, the film Black Hawk Down was playing to large audiences in Manila theaters. A friend who has seen it says, "I thought this was a pro-war film. It actually makes a powerful case against intervention". True-underneath the patriotic gore, the film about the disastrous 1993 Delta Force and Ranger raid in Mogadishu actually gives off two powerful lessons, perhaps inadvertently. One is that US units like Delta Force, the Rangers and Special Forces are veritable killing machines. The second is that even when you kill large numbers of people-and in less than twenty-four hours, the Americans killed more than a thousand Somalis-you can't prevail against an enraged population that does not want you around. A few weeks after the raid, the United States withdrew from Somalia. As US troops prepare to plunge into Basilan's witches' brew of insurgents, terrorists, bandits, warring communities and inhospitable jungle, one has a feeling that history, cunning and inscrutable, might this time deal the Americans a hand that is less like Afghanistan and more like Mogadishu. Indeed, to have an operation begin with a helicopter crash does not augur well for its outcome. "Abu Sayyaf 10, US Zero" is the comment making the rounds in Manila. Inspection Report on Samut Prakarn Shakes Asian Development Bank (26 March 2002)
The report on a controversial wastewater management project in Thailand by an independent Inspection Panel of the Asian Development Bank (ADB) has struck Bank management like a thunderbolt.
To make things worse, most of the key conclusions of the inspection panel on ADB management's decision-making behavior have been endorsed by the ADB Board Inspection Committee. The focus of the report, the Samut Prakarn Wastewater Treatment Project, was designed to alleviate massive water pollution in Samut Prakarn province, the most heavily industrialized and rapidly urbanizing of the five provinces of the Bangkok Metropolitan Region in Thailand. Sharp escalation of project costs eventually made the project the largest turnkey project ever supported by the ADB, with the figure reaching US$948 million, of which about $230 million came from the Bank. The revision of original estimates was accompanied by major changes in the design of the project. One such change brought into the project a site that was not originally included: the village of Klong Dan. This was done without consultation of the residents, provoking protests from the villagers, who accused the Bank of violating its key policies, including those on consultation, resettlement, environment, and good governance. In a letter to ADB President Tadao Chino, three individuals-the mayor and two civic leaders representing the villagers- asked for an immediate halt to ADB funding for the project and an investigation of what they claimed were the "many violations of ADB policies". Under pressure from a campaign waged by key groups in Thai civil society and a number of international NGO's-which included a massive protest during the ADB's 33rd annual meeting in May 2000-the Bank Board commissioned a review of the project by an independent panel. The team was eventually composed of Judy Henderson, chair of Australian Ethical Investment Ltd, Wiert Wiertsema, co-founder of the Dutch NGO Both Ends; and Pin-Cheung Loh, former Secretary General of the International Cooperation and Development Fund in Taipei. Despite obstruction from the Thai government and ADB management's marked reluctance to assist them in visiting the project site without having to conform to what panel members viewed as unacceptable conditions imposed by the government, the inspection panel issued a report based on available data and interviews with Bank staff members in November 2001. Damning Findings The findings were damning. According to the inspection panel, the Bank management:
- violated its policies governing the review of cost overruns by not carrying out a reappraisal of the whole project in preparing financing for a supplementary loan;
In response, the Bank's management drafted a point-by-point rebuttal of the Inspection Panel report. However, the Board Inspection Committee (BIC) headed by John Lockart of Australia upheld most of the Panel's main findings. According to the BIC, "ADB's failure to comply with policies on supplementary financing of cost overruns and operational missions (and particularly the failure to carry out a comprehensive reappraisal after a fundamental change in technology and a massive cost overrun and again when a substantial supplementary loan was processed) constituted and led to important omissions". It went on "accept" the inspection panel's conclusion that "a relevant group has suffered direct and material harm as a result of ADB's noncompliance with operational policies and procedures". Inexplicable Recommendation It is inexplicable, however, that after finding significant deviations from its policies that resulted in harm to Klong Dan villagers, the inspection panel did not recommend suspension of loan disbursement, as the Klong Dan villagers demanded. In fact, the suggested course of remedial action is rather weak, consisting of ADB management admitting it did not comply with its policies, improving the monitoring, consultation, and participation process, and working with the Thai government to compensate villagers for the harm done to them. Reparations are unlikely to occur, however, since, as a multilateral institution, the Bank is exempted from damage claims and the Thai government has stoutly resisted any suggestion it behaved inappropriately in implementing the project. Fear that they would be used to legitimize continuation of the project was one of the factors that prompted the Klong Dan villagers to refuse be interviewed by the panel. With the inspection panel's formula of getting management to acknowledge violations of policy while endorsing continued ADB funding of the project, the villagers' skepticism about the inspection process appears to have been justified. Siege Mentality Nevertheless, the panel report is creating consternation among Bank staff. Management fears that the Samut Prakarn fiasco will dominate talk at the Bank's 35th annual meeting in Shanghai in mid-May. There is also the fear that there will now be greater public scrutiny of the Bank's operational policies, many of which are not yet in the Operations Manual and thus inaccessible to both staff and the public. In fact, according to one ADB source, "the Operational Manual has not been updated for five years, which raises fundamental questions about staff being aware of the existence of certain policies". The biggest fear, however, is that the Samut Prakarn case-the first inspection to be conducted under the Board's inspection policy approved in 1995- will trigger other requests for independent inspection panels. Two controversial projects, one in Sri Lanka, the other in Pakistan, are said to be in the inspection pipeline as a result of strong pressure from civil society groups. To contain the impact of such inspections, management is seeking to limit what is "inspectable" in projects in fairly narrow terms to "operational policies and procedures that provide ADB staff with mandatory directions on how to formulate, process, and implement projects" and exclude all other matters such as "strategies and strategic aspects of all policies". Skepticism Will the Samut Prakarn decision really mean a change in the Bank's way of doing business? Many within the Bank are doubtful. Noting the move to limit the elements of projects open to inspection, an ADB economist who requested anonymity said, "Instead of opening itself to a transparent process, the Bank is allowing itself to be taken over by a siege mentality". Referring to the response of management to the inspection panel report, she continued, "the document amounts to a blanket defense not only of everything the ADB staff did but of everything the Thai government did-including preventing the inspection panel from conducting a site visit". This skepticism was echoed by an alternate director in the ADB board: "These fellows are entrenched, and they'll manage to resist change. Look, you have a great inspection panel report, but there's hardly any change. The project goes on". Controversial Report Poisons Board-management Relations at ADB (April 2002)
The Asian Development Bank (ADB) Board is the latest casualty of a controversial wastewater treatment plant in Thailand.
Notes taken by a participant at the most recent meeting of the ADB Board on March 25 that were made available to the author reveals an institution that is deeply shaken and split by the report of an independent inspection panel on the project, which is located in Samut Prakan province. The independent inspection, the first ever undertaken by the Bank, was triggered by the petition of the people of Klong Dan, a village affected by the project. The report faulted Bank management for violating at least six of its policies. In response, the Bank management issued a response denying all the charges. The Board Inspection Committee (BIC), in turn, supported the findings of the inspection panel, setting the stage for what one participant characterized as the "most contentious board meeting in ADB history". During the meeting, the BIC itself was caught in the crossfire of critics and supporters. The result was a compromise that is likely haunt the ADB for a long time. The Board refrained from endorsing the full BIC report, coming out in support only of a carefully worded statement committing the ADB to being "an active participant" with the Klong Dan community and the Thai government in the "proper assessment of damages by the Thai government and, where relevant, the award of appropriate compensation". The Board's failure to mention any wrongdoing on the part of management, much less reprimand it, was, in the view of some observers, one more step in a retreat from confrontation with management. Before the board meeting, the inspection panel and BIC decided not to seek an end to funding for the project in spite of their devastating findings on management's transgressions. Foremost among the critics during the Board meeting was, not unexpectedly, Alternate Director Ram Binod Bhattarai, who represents a group of countries that includes Thailand. Bhattarai attacked both the inspection panel and the BIC for "disregard of the Thai authorities and lack of respect for the sovereign rights of Thailand". The BIC had supported the inspection panel's decision not to make a site visit owing to what the latter considered "unacceptable" conditions imposed by the government. For Bhattarai, it was the BIC and inspection panel that were at fault for "politicizing the event", with "premature releases of information to the press and welcoming flags in the Klong Dan community... indicating a beginning of an unhealthy pattern and a display of lack of professionalism". China Attacks Panel and BIC Bhattarai's comments were, however, mild compared to those of Director Zhao Xiaoyu representing China, who began by saying that while the report might strike some as "a nice piece of steak, to me it is a lousy dish that is overcooked". Asking what the Bank had gotten after spending nearly $2 million on the inspection process, Zhao answered: "We have produced a pile of groundless damaging paper. The Bank's credibility is undermined, the staff is demoralized, the Thai government is fed up, and a good environmental project is unduly held up for two years. The only visible gain is to a handful of experts and consultants who got a fat contract without having to worry about being held accountable". While attacking the inspection panel as enjoying a "power equivalent to God", Zhao professed concern for the morale of the ADB staff, who would be encouraged by the Samut Prakan example to engage in "risk-averse behavior". The effect on the ADB, he predicted, would be like the impact on the World Bank of the full-scale inspection done on the Bank's controversial Western Poverty Project in China, which civil society groups had accused of displacing ethnic minorities. "Today, if one visits the offices of senior officials of multilateral institutions working on China, you will find big China maps on the wall with little red flags pinned here and there. These are not flags indicating bank activity. They are core reminders to senior managers that these are regions with ethnic residents, and they should keep away from those places, even if these are areas of great poverty". A Board vote in support of the BIC report, said Zhao, "would see similar red flags sprout in the rooms of our own ADB staff reminding them to keep away from wastewater projects" thereby "leaving people to suffer surrounded by stinking wastewater and sludge". Saying that Board support for the BIC was "not courage but hypocrisy", Zhao concluded by calling the Samut Prakan inspection "fraudulent and the conclusions based on it groundless". Zhao's remarks were supported by Directors P.G. Mankad, representing a group of countries including India and Bangladesh, and Zaheer Ahmed, representing a bloc that includes the Philippines and Pakistan. Mankad warned the Board that by approving the BIC report, they would be "leaving the bank vulnerable to open-ended liabilities, bad precedents, and potential lawsuits". Management Under Siege Supporters of the BIC report were perhaps not as inflammatory in their comments but they were equally firm in their views. C. Alexander Severens, speaking for the United States, faulted the Thai government for obstructing a site visit, a move that eroded the credibility of the inspection process. According to Severens, "When a government receives resources from this institution, it implicitly and explicitly makes a commitment to cooperate with all representatives of this institution. Accordingly, we would hope that any government would guarantee that all representatives of the Bank, including Inspection Panel members, can do site visits. Efforts were made in this case, but it is regrettable that a site visit under reasonable conditions could not be facilitated". Alternate Director Frank Black, representing a bloc of countries including the United Kingdom, lashed out at what he regarded as the ADB management's ultra-defensive response. In his words, "the really fatal error-the point at which a bad situation became infinitely worse-was when management totally rejected the findings of the independent panel". In his view, this "did not show an institution living up to the high and necessary ideals of accountability, transparency, and capacity to be a learning institution". Black and a number of other directors criticized Bank President Tadao Chino for making what they felt was a big mistake in signing the management response to the inspection panel since, in their view, this compromised the neutrality he was supposed to exhibit as chairman of the Board. Chino was also commanded by US representative Severens "to look into some actions of the staff which seem to indicate unwillingness to have the inspection process function as intended. This concerns us gravely and we hope you will look into this matter and ensure it does not happen again". Chino on the Way Out? Listening to the exchange, one participant commented, "I thought, there goes his job. Chino alienated management by allowing the inspection to proceed. And he alienated the BIC by endorsing a fierce management reply denying all charges". Even the Japanese director, Osamu Tsukahara, abandoned Chino, who comes from Japan's Ministry of Finance, by siding with the BIC and admonishing management "that it is of critical importance to listen carefully to NGOs and others' opinions". He also instructed Chino to push the Thai government to "accelerate" its investigation of the villagers' charges of corruption by government officials involved in the Samut Prakan project. Tsukahara told Chino to remind the Thai government that "the right of the borrower to make withdrawals may be terminated if corrupt or fraudulent practices were engaged in by the borrower and no timely and satisfactory action has been taken to remedy the situation". If he follows this missive from the ADB's most powerful member-country, Chino is likely to add the Thai government to those he has alienated. Board-staff Relations Poisoned Already beset by many problems before the Samut Prakan inspection, the ADB has been plunged into disarray by recent developments. The relationship between Board and Staff has been poisoned, and within the board, members from donor countries and those from recipient countries are increasingly separated by a wide gulf in values and priorities. "Samut Prakan simply brought festering antagonisms to the surface", says one staff economist. "This institution, if it survives, will never be the same again". Another staff member, also speaking under conditions of anonymity, was more cynical. "After the sound and the fury, the Board will get behind a recalcitrant management and it will be business-as-usual", she asserted. "Just wait and see". What's Wrong with the Oxfam Campaign? (April 2002)
Oxfam International recently launched a global campaign to promote wider access for developing country products in northern markets.
I have a lot of respect for Oxfam, and I do agree with many things in the Oxfam report, but I feel that it provides the wrong focus and wrong direction for the movement against corporate-driven globalization during this critical period. First of all, the focus on market access misleads people into believing that it is access to the markets of the North that is the central need and central problem of the global trading system. Far from it. The central problem is the paradigm of free trade that the World Trade Organization is relentlessly imposing on the global trading system. Reduced market access for Southern products and agricultural subsidies do pose problems for the Southern economies, but far more destructive are the measures of indisciminate liberalization of trade-in industry, services, and agriculture-that the WTO is pushing. The so-called new issues-or efforts by the WTO to liberalize and gain control over investment, competition policy, government procurement, and trade facilitation-are the cutting edge of the current WTO drive to put free trade uber alles, as Ralph Nader says, and opposition to them should be the main thrust of international civil society. Second, the market access focus does, as Food First noted in its response to the Oxfam Report, promote the paradigm of export-oriented growth, since it is monopolistic export agricultural interests that will be the main beneficiaries of greater agricultural market access to northern markets. Even in the case of staple foods like rice and corn, it is not small farmers that benefit but big middlemen. A focus on market access for agricultural products from the South in the North will also increase pressures on developing countries to open up their markets as the quid pro quo for the accelerated opening of markets in the North. Thus, this strategy simply undermines the effort of many small-holder-based agrarian movements in the South to reorient production from export agriculture based on big landed and corporate interests to small-farmer based production systems producing principally for the local market and protected by tariffs and quotas from unfair competition by subsidized products dumped by the Northern countries. To be fair, Oxfam does say it is concerned about the future of smallholder-based agrarian systems in its report, and I do believe it sincerely is. However, the thrust of its campaign on market access in the North undermines this concern. Market access as a central thrust in the effort to reform the world trading system is not being pushed by any developing country or developing country grouping. As far as I know, it is mainly being pushed by the Cairns Group, and within the Cairns Group by the trio of Australia, New Zealand, and Argentina. Indeed, leading officials in both the Philippines and Indonesia, are now talking about taking their countries out of the Cairns Group, partly because they feel that the agenda has been hijacked by those members obsessed with the market access issue. It is incongruous that Oxfam has emerged as a civil society advocate for the Cairns Group position. The Washington Post has suggested that Oxfam's market access focus indicates that Oxfam has joined the free market camp. We not agree. At the same time, the Post's misperception is perfectly understandable given the Oxfam focus on market access as the evil to be flayed. The problem we face is a comprehensive one-a determined effort to impose a neo-liberal trading order by an organization that is unrepresentative, undemocratic, non-transparent, and dominated by the trading superpowers. Supporting the efforts of developing country governments and civil society movements to stop this steamroller by bringing up the implementation agenda, exposing the decision-making structure, supporting food sovereignty, and stopping the extension of WTO jurisdiction over the new issues should be the content and thrust of a campaign by international civil society groups. To its credit, the South-North "Our World Is Not For Sale Campaign" has adopted this stance. I would recommend that Oxfam take the same route. It is also unfortunate that in its report, Oxfam branded a large sector of the movement against corporate-driven globalization as "globaphobes". This sort of name-calling is not helpful. In fact, it has been the so-called "globaphobes" that have created the dynamic movement that has shaken the international financial and trade institutions and forced them to listen to the views of organizations like Oxfam. It would be nice if Oxfam acknowledged this instead of promoting caricatures of others in the movement against corporate-driven globalization. I am sorry to have to differ publicly with Oxfam on this issue, especially since I have a great deal of respect for its humanitarian and development work. But it is only via debate and dialogue among partners and allies that we can chart a solid path forward. Soros on Global Governance Reform: Interesting but Disappointing (25 April 2002)
George Soros, the financier, has recently received attention for his critique of the global financial system, especially for his analysis of the paradigm of "market fundamentalism" that undergirds it. His most recent book, On Globalization (New York: 2002), which has been promoted as a thoughtful critique of the current system of global economic governance, presents a blueprint for reform of the WTO, the IMF, and the international aid system.
Countervailing Institutions without Teeth Soros' proposals are not without merit. He stands most firmly when he deals with the WTO. Unlike many other proponents of global governance reform like the International Confederation of Free Trade Unions (ICFTU), Soros does not propose attaching amendments like labor or social clauses to the WTO charter. This is not, however, for the reasons given by many WTO critics, who say that this would simply give more power to an already extremely powerful organization since the WTO would be given the mandate to be the ultimate judge in trade and labor issues. Soros supports the WTO mission of promoting "rules-based liberalization of international trade" and believes that WTO "accomplishes that mission brilliantly". Soros' reason is that this would overload the WTO with a task that it is not equipped to do while hampering it in fulfilling its main role of global trade liberalization. Other institutions should either be strengthened or created to promote what Soros calls "global public goods" such as labor rights, the environment, consumer safety, and public health. The International Labor Organization (ILO), for instance, must be strengthened vis-?-vis the WTO, and the place to start is by forcing governments to ratify ILO conventions. Civil society, he argues, should be pressuring the US government, for instance, which has ratified only 13 of 182 ILO conventions and only two of eight "core labor standards". This promising approach of urging the creation or strengthening countervailing institutions devoted to public goods is nevertheless undermined by his failure to follow through on the political consequences of his analysis. Inexplicably, he does not propose coercive power for such countervailing institutions but would limit them to eliciting "voluntary compliance". In fact, the problem lies not in the lack of countervailing institutions-there are scores of multilateral environmental agreements and organizations; it lies in their lack of coercive power. In contrast, the WTO enjoys formal coercive power while the IMF and World Bank possess informal coercive power owing to their control over massive financial resources. Giving Wolfensohn a Chance When it comes to the World Bank, Soros' reform proposals are on even more tenuous ground. He argues that the proposal of the Meltzer Commission to convert the World Bank into a World Development Authority specializing in grants to the poorest countries is not acceptable because "so-called middle income countries like Brazil, and even Chile, have very uneven income distributions and great social needs". He also argues for giving James Wolfensohn a chance to implement reforms like the Comprehensive Development Framework (CDF) or the Poverty Reduction Strategy Papers (PRSP). Lending operations must be reformed, there should be more consultations with civil society, loans to repressive and corrupt regimes should be stopped, directors should be made more independent of the governments they represent, steps must be taken to prevent the staff from dominating the agency like putting a limit of five years on employment. The problem here is that many of these reforms have been tossed about for 30 years, ever since the tenure of Robert McNamara, yet things have not improved. As Soros himself has admitted on other occasions, the Bank's performance has simply gotten worse and the bureaucracy has become more immovable. As noted earlier, the CDF framework and the PRSP have not meant a break with the old macroeconomic paradigm guiding both World Bank and IMF structural adjustment programs which stressed narrowly defined economic efficiency, greater market orientation, and fiscal and monetary stability. Consultations with civil society groups have, in fact, taken place under Wolfensohn, but this has amounted to no more than a public relations exercise, the main legacy of which has been greater suspicion of the Bank by many grassroots NGOs that felt the Bank was isolating them as "unreasonable" NGOs and dealing only with "reasonable" ones. As for giving Wolfensohn a chance, this is a highly personal calculus which is not likely to sound credible to pro-reform elements who have been waiting for nearly a decade since Wolfensohn's appointment as World Bank head for some improvements to take place. Critics point out that the Wolfensohn regime is in many ways a replay of the era of Robert McNamara, with the same "anti-poverty" rhetoric and strategy, and with the same meager results in terms of effective aid programs. Creating Money for Aid In the end, Soros admits that keeping the World Bank afloat is only a temporary measure designed to ward off the attack of the political right on multilateral aid, thus buying time to place a better aid mechanism in place. That mechanism would be the issuance of special drawing rights (SDRs) via the IMF and the rich countries' donation of their share to a development fund. This would mean treating the SDR not just as a reserve currency but as a real asset to be used for development purposes. Should the rich countries agree to treat SDRs as real assets and to donate their share of the new SDRs created to aid, Soros says, there would immediately be available some $18 billion under a special SDR issue already approved by the IMF but awaiting ratification by the US Congress. Under the proposal, an "international board operating under the aegis of the IMF but independent of it" would be set up to decide which projects or programs would be eligible for funding. The board would actually have no authority over the spending of funds but "would merely prepare a menu from which the donors would be free to choose, creating a market-like interplay between donors and programs, supply and demand. Creating money to pay for aid seems like the perfect solution. But the basic problem is that it puts too much emphasis on the volume of aid as the key to development rather than the conditions and implementation of aid. Soros cites favorably the United Nations report co-authored by former Mexican President Ernesto Zedillo that calls for an increase of $50 billion in aid. Soros has fallen victim to the same syndrome that also ensnared Robert McNamara: that poverty can be solved by throwing money at it. The paradigm within which aid programs operate is a far greater determinant of success, and this is absent from Soros' proposal, except for mention about "a greater role of civil society organizations" in aid delivery. The Soros proposal, moreover, does not solve one of the key problems with the Bretton Woods system, which is the stranglehold on decision-making by the rich countries. The donors of SDRs-meaning the OECD countries-would still be the ones to decide which programs or projects are worth supporting. As in the case of the World Development Authority proposed by the Meltzer Commission, the massive power imbalance that is at the heart of the Bretton Woods system of multilateral aid remains. Indeed, with no developing country representation assured either on the proposed board or among the funders' consortium, the outcomes could be worse under this "market-like system" than under the present system. Strengthening the IMF When it comes to the IMF, Soros' critique of the institution follows the now familiar lines: the Fund pushed the capital markets of the Asian economies before they were prepared for it, thus creating the conditions for the Asian financial crisis; and when the crisis did hit, the Fund promoted pro-cyclical policies, such as tight budgets and high interest rates, that worsened the crisis. Soros says that he partly agrees with the conservative critique that the IMF's past interventions created "moral hazard", but he says that this was to a great degree inevitable to attract private capital to the developing world since without some extra-market incentives, capital would not have flowed there. Soros' defense of the Fund as necessary to attract capital to the developing world suffers on two counts from a historical perspective. First, given the conditions of limited profitability in the metropolitan economies in the early nineties, foreign capital had no choice but to migrate to areas that were regarded as offering better opportunities profit-wise; in other words, it is likely that they would have done this whether these countries had IMF programs or not. The example of Malaysia, Singapore, Hong Kong, China, and Taiwan-all of which either had no IMF programs or had inconsequential ones-underline this. Second, the sort of capital that was encouraged to enter developing country capital markets by the possibility of an IMF rescue in the event things soured was speculative capital, which was mainly interested in high rate-of return, quick turnaround kind of investments such as the stock market or real estate. This is not the kind of capital that contributes to development. In contrast, the dynamics of foreign direct investment, which involves a strategic commitment to the economy, is not determined by IMF guarantees. The importance Soros attaches to the Fund as mechanism of getting capital to flow to the developing world is what makes him support strengthening the IMF despite what he acknowledges as its poor record in the developing world. Some reforms that Soros seeks are viable. "Bailing in" lenders instead of bailing them out-that is, having them participate with financing a rescue program and agreeing to take losses in the process is one. Establishing an international bankruptcy mechanism that would protect the debtor and allow an orderly process of both economic recovery for the debtor and asset recovery for the creditor is another. However, establishing a contingency credit line (CCL) that countries with "good policies" can tap into before a crisis begins is unsound, for two reasons which have already been pointed out by other critics and of which Soros is aware: first, few countries would dare take advantage of CCLs for fear of alarming investors that a crisis is impending and thus create conditions for a stampede; second, the IMF's well-known inability to distinguish good from bad policies. Thus we are back to the fundamental problem. The Fund is saddled with a paradigm that puts a premium on macroeconomic stability, legal and political conditions that promote the interests of foreign capital, and the unrestricted functioning of the market. This paradigm, coupled with the United States Treasury's propensity to use the Fund to advance US economic and corporate interests, is at the heart of the Fund's succession of failures in the developing world. Giving the Fund more power like offering CCLs and managing an international bankruptcy regime is tantamount to rewarding failure. Like the Meltzer Commission, Soros begins by criticizing the Fund for wrong policies but ends up believing that it "needs to play a larger rather than a lesser role..". In the end, Soros' foray into the world of the multilaterals is interesting but very disappointing. The basic reason for this is that there is a fundamental contradiction between analysis and prescription. Soros' analysis of the Bretton Woods institutions is damning, yet he ends up either supporting maintaining them, as in the case of the Bank, or expanding their powers, in the case of the IMF. Perhaps he realizes that, after all, he has, as a successful capitalist, benefited greatly these institutions. America's War in the Philippines (27 April 2002)
An International Peace Mission suggests that the US-aided hunt for Abu Sayyaf is merely an excuse that enables the US to establish and expand a military presence in the region.
With 120 United States Special Forces units assisting 6,000 Filipino troops to flush out the Abu Sayyaf band that made news by kidnapping Western tourists, the island of Basilan in the Philippines has become the so-called "second front" against terrorism "Links to Al Qaeda" is the reason Washington presents for zeroing in on Abu Sayyaf. However, even the Philippine government admits that there is no evidence of ties between Al Qaeda and Abu Sayyaf after 1995. Indeed, several intelligence agencies in the region have instead linked Al Qaeda to the Moro Islamic Liberation Front (MILF). The American presence is of course controversial. The deployment of foreign troops to deal with an internal insurgency or bandit problem is unconstitutional. The government of President Gloria Macapagal-Arroyo has sought to retain a modicum of legality by bringing in US personnel under the guise of engaging them in the Balikatan ("shoulder-to-shoulder") joint military exercises. However, this explanation has not mollified critics, who not only question the legality of the US presence but also fear that it will be profoundly destabilising for both the Philippines and the region. A 14-member International Peace Mission that was composed of parliamentarians, academics, and civil society activists from nine countries visited Basilan and the neighbouring province of Zamboanga between March 23 and 26 to investigate the reasons and consequences of this sudden and expanding military commitment. Among the issues they probed was what "added value" the US troops brought to the fight against Abu Sayyaf. They found little conclusive evidence. Indeed, as University of the Philippines Professor Roland Simbulan, a member of the mission, observed, "When it comes to counterinsurgency, the Philippine army, which has been fighting counterinsurgency wars almost continuously for the last 50 years, has probably more to teach the United States". Imparting training in the use of high-tech surveillance equipment, including pilotless spy planes, is said to be a vital contribution by the US to the hunt for Abu Sayyaf. However, after over two months of the Special Forces' deployment and despite the use of high-tech equipment, the situation has not improved. An estimated 60 to 80 bandits continue to hold three hostages, including two American missionaries, and elude over 6,000 troops and their advisers on an island, which is not more than 1,359 square kilometres in area, where much of the primary forest cover has been destroyed by indiscriminate logging. To members of the peace mission, the continuing failure of the military to quell a mere handful of bandits indicates that the main problem is political in character, not military. Abu Sayyaf appears to have a base in a Muslim majority that is resentful of their steady dispossession by a Christian settler community. More important, the bandits seem to enjoy support in high places, particularly in the provincial government and the regional military command. Particularly striking was the testimony that members of the peace mission heard from the Catholic priest Father Cirilo Nacorda and other former Abu Sayyaf victims, who claimed that the Abu Sayyaf band that had kidnapped tourists in Palawan last year were allowed to get away after being trapped by the military. According to Nacorda, the ransom money was shared by the bandits, the army officers and the governor of the province, Wahab Akbar, who acted as the go-between. According to a preliminary report that was drawn up by the head of the mission, if the problem is mainly political, "relying on a military solution is not likely to produce results. Dismantling the structures of collusion and corruption should be the main focus, not adding more troops and firepower". The US' recent request to the Philippine government to add about 300 more troops to the 160 that have already been deployed, has caused the mission to suspect that chasing Abu Sayyaf is merely an excuse for a "strategic intent", which is to "establish and expand a military presence in the southern Philippines directed at Muslim revivalist movements there and in South-east Asia". If this is the case, it warns, "then the Philippines may be sliding into a situation of being a base for a long-term US war against insurgents and revivalist movements, with all the destabilising consequences for the whole region of such an endless war". Already, the stepped up involvement is creating more than just political problems such as the infringement of sovereignty or the threat of potential conflicts with the Philippines' neighbours, such as Malaysia or Indonesia. There are more mundane issues that could nevertheless be powder kegs, such as the return of the sex trade catering to US troops or the violation of land rights in the acquisition of training sites. However, the process of increased intervention has been set in motion. And the arrival of the Americans is not unpopular. In the province of Zamboanga, the Christian majority is said to favour overwhelmingly the coming of the Americans. In Basilan itself, there is strong support for the US presence in the key towns of Isabela and Lamitan, where Christians are in the majority. However, in the Muslim-dominated interior, there is allegedly much less support. The fact is that Christians in particular appear to think that the US presence is the magic bullet that will end the 30 years of almost constant warfare that has been waged between them and Muslims who were rendered a minority in their traditional homeland in Mindanao. Since the roots of Christian-Muslim conflict lie in economic dispossession, political subordination and religious discrimination, this is an illusion that is not likely to survive the destabilising consequences of the US presence. The US' allies in this unfolding war are themselves likely to be the source of many of its future frustrations. Both the US and Philippine government officials said that they welcomed the mission. However, a few days after the International Peace Mission left Basilan, some island activists who had assisted in organising their trip were fired upon, while several others were arrested without warrants. Like so many other armed incidents in this conflict-ridden province, everybody knew who organised the terror campaign, and it was not Abu Sayyaf. The Oxfam Debate: From Controversy to Common Strategy (May 2002)
In response to my critique of its market-access campaign, Oxfam International recently issued a lengthy rejoinder authored by Angus Cleary, Oxfam Great Britain's campaigns director. I would like to thank Angus for taking the time to reply to my concerns.
Let me say at the outset that notwithstanding my differences with Oxfam, I feel that it has done the movement against corporate-driven globalization a great service by pushing the question of our strategy on the trade front to center stage. This is an issue I will return to after first dealing with a few items in the Oxfam response to my statement. Obfuscation Rather than Clarification Unfortunately, Oxfam's rejoinder promotes obfuscation rather than clarification of the issues. For instance, Oxfam now denies that it is launching a global campaign for greater market access for developing country products in northern markets, saying that market access is just "one theme among many" of its trade campaign. Yet, Severina Rivera, senior policy advisor on trade to Oxfam America, recently resigned precisely because market access was the main thrust of the Oxfam campaign. To quote Ms. Rivera, "I cannot support Oxfam's trade campaign priority that calls, over the life of its 3-year campaign, for more market access and trade for poor countries as the solution to poverty. Nor can I support the year-one campaign objective: market access for textiles from least developed countries as the solution to, or even a solution to poverty in these countries". Another disconcerting example of this obfuscation has to do with the use of the word "globaphobes" to brand the anti-corporate globalization movement. The rejoinder says that the Oxfam Report was referring to some minuscule, marginal groups in the North. But what does the Oxfam Report really say? The summary reads: "Current debate about trade are dominated by ritualistic exchanges between two camps: the 'globaphiles' and the 'globaphobes.'" This passage shows clearly that Oxfam uses the word globaphobes to describe the whole camp of free trade critics, not just a few marginal groups. In the very next paragraph, Oxfam makes clear that what it means by globaphobes is the "anti-globalization movement". Oxfam cannot be unaware of the fact that "globaphobes" is a highly politically charged word with pejorative connotations that was coined by the Economist, Martin Wolf of the Financial Times, free-trade ideologue Jagdish Bhagwati, and other free-marketeers to denigrate and caricature the whole range of critics of the WTO and free trade, from labor unions to peasant groups, from environmentalists to proponents of managed trade. Some have said that Oxfam's painting the trade debate as being divided into two big camps, whose arguments it then proceeds to caricature, is an opportunistic ploy that is designed to project Oxfam as taking the rational, sensible middle road between two irrational blocs. Whether that was, in fact, the intention, that is in fact the effect. And the storm of protest this has evoked from so many activists that are otherwise respectful of Oxfam's work should tell Oxfam that you can't have it both ways: You can't say you're part of us then score with the Establishment by caricaturing us in the crudest Economist fashion. The rest of the Oxfam response pretty much proceeds in the same vein, so that in the end we are left not with clarification, but with the question: Where does Oxfam really, really stand on the key substantive issues at stake such as free trade, trade liberalization, export agriculture, and the World Trade Organization? The Larger Issue: What Strategy on the Trade Front? We are, however, not engaged in an academic debate on the pros and cons of export agriculture or market access. Indeed, as I said above, if there is one thing that we can thank Oxfam for, it is that by pushing its market access campaign, it has forced the movement against corporate-driven globalization to confront the question of what should be its strategy on the international trade front. It is likely that at the heart of our debate with Oxfam are not only differences on substantive issues like the costs and benefits of market access or the domestic impact of export agriculture but also divergent postures on strategic issues like what priorities the movement should have at this point and how it should go about achieving them. Strategy must respond to the needs of the moment in the struggle against corporate-driven globalization. This can only be derived by identifying the strategic objective, accurately assessing the global context or conjuncture, and elaborating an effective strategy and tactical repertoire that responds to the particularities of the conjuncture. For the movement against corporate-driven globalization, it seems fairly clear that the strategic goal must be halting or reversing WTO- mandated liberalization in trade and trade-related areas. The context or "conjuncture" is characterized by a fragile victory on the part of the free-trade globalizers at the 4th Ministerial at Doha, where they bludgeoned developing countries into agreeing to a limited round of trade talks for more liberalization on agriculture, services and industrial tariffs. The conjuncture is marked by the globalizers' effort to build momentum so as to have the coming 5th Ministerial in Mexico launch negotiations for liberalization in the so-called trade related areas of investment, competition policy, government procurement, and trade facilitation. Their aim is to have the 5th Ministerial expand the limited set of negotiations they extracted at Doha into a comprehensive round of negotiations that would rival the Uruguay Round. This expansion of the free trade mandate and the expansion of the power and jurisdiction of the WTO, which is now the most powerful multilateral instrument of the global corporations, is a mortal threat to development, social justice and equity, and the environment. And it is the goal that we must thwart at all costs, for we might as well kiss goodbye to sustainable development, social justice, equity, and the environment if the big trading powers and their corporate elites have their way and launch another global round for liberalization during the WTO's 5th Ministerial Assembly in Mexico in 2003. Campaign Objective: Derail the Drive for Free Trade at the 5th Ministerial Given the strategic goal of stopping and reversing trade liberalization, the campaign objective on which the movement against corporate-driven globalization must focus its efforts and energies is simple and stark: derailing the drive for free trade at the 5th Ministerial, which will serve as the key global mechanism for advancing free trade. The free trade partisan C. Fred Bergsten, head of the Institute of International Economics (IIE), has compared free trade and the WTO to a bicycle: they collapse if they do not move forward. Which is why Seattle was such a mortal threat to the WTO and why the globalizers were so determined to extract a mandate for liberalization at Doha. Had they failed at Doha, the likely prospect was not simply a stalemate but a retreat from free trade. For the movement against corporate-driven globalization, derailing the 5th Ministerial or preventing agreement on the launching of a new comprehensive round would mean not only fighting the WTO and free trade to a standstill. It would mean creating momentum for a rollback of free trade and a reduction of the power of the WTO. This is well understood by, among others, the Economist, which warned its corporate readers "globalization is reversible". If derailing the drive for free trade at the 5th Ministerial is indeed the goal, then the main tactical focus of the strategy becomes clear: Consensus decision-making is the Achilles heel of the WTO, and it is the emergence of consensus that we must prevent at all costs from emerging. In the 16 short months before the 5th Ministerial, the anti-corporate globalization movement must focus its energy on ensuring that countries do not come into agreement in any of the areas now being negotiated or about to be negotiated, that is, agriculture, services, and industrial tariffs; and at the ministerial itself, preventing any consensus from emerging on negotiating the new issues of government procurement, competition policy, investment, and trade facilitation. The aim must be, as in Seattle, to have the delegates go to the ministerial with a "heavily bracketed" declaration-that is, one where there is no consensus on the key issues-and at the ministerial itself, to prevent consensus via last minute horse-trading. As in Seattle, the end goal must be to have the ministerial end in disagreement and lack of consensus. Components of the Strategy If the goal is unhinging the game plan for greater free trade at the 5th Ministerial, then the anti-corporate globalization movement has its work cut out for it. We must unfold a multi-pronged strategy whose components must include:
- unraveling the alliance between US Trade Representative Robert Zoellick and EU Trade Commissioner Pascal Lamy by exacerbating the US-EU conflict on Europe's agricultural subsidies, the Bush administration's failure to obtain unrestricted fast-track authority to negotiate from the US Senate, Washington's imposition of protective tariffs on steel and its resurgent trade unilateralism, and the US' export of hormone-treated beef and genetically modified organisms (GMOs);
The task is immense and we have so little time. But we have no choice. The trading powers and the WTO learned from Seattle, and they brought the bicycle of the WTO back on its wheels in Doha. Likewise, we must learn from Doha so that we can wrestle the bicycle back to the ground in Mexico. And among the key lessons we need to absorb is that our coalition must have a coordinated strategy that brings our work on many different fronts, levels, and dimensions to bear on one goal: unhinging the drive for free trade at the 5th Ministerial. Strategic Flaws of Oxfam's Market Access Campaign Given these considerations, the Oxfam market access campaign reminds us of General Omar Bradley's classic description of the Korean conflict, which was that "it was the wrong war at the wrong place at the wrong time". In terms of strategy, the Oxfam market-access campaign suffers on a number of counts: One, it is unfolding in a strategic vacuum-that is, it lacks any connection or relevance to a broader strategy aimed at stopping and reversing trade liberalization by unhinging the free-trade drive at the 5th Ministerial. The Oxfam market-access campaign has all the hallmarks of a campaign that is driven not by a strategy derived from the global conjuncture on the trade front but by an internal organizational imperative to have a "winnable" short-term campaign. Two, it simply distracts the movement from its real priority at this point, which should be derailing the free trade drive at the 5th Ministerial. Oxfam should realize that there is a great difference between doing an expose and mounting a campaign, that is between exposing the double standards and hypocrisy of the big trading powers when it comes to market access and actually launching a campaign for greater market access. Campaigns must focus on promoting the strategic priorities of a global movement that is finite in its resources and energies instead of waylaying the movement into side streets where the results can even be counterproductive. Three, the market access campaign is, in fact, counterproductive. Oxfam knows that elimination of textile and garment quotas in developed country markets is already mandated under the Uruguay Round, and that the big trading powers are simply dragging out their elimination of textile and garment quotas until the last years of the 10-year phase-out period (to be replaced, as many suspect, with more aggressive anti-dumping action against developing country imports). WTO director general Mike Moore knows that this foot-dragging is a sore point with developing countries-one which is undermining the credibility of the WTO in their eyes-and this is the reason he can readily support Oxfam's campaign, which has a one-year focus on ending the quotas. Indeed, part of the strategy that Moore and the WTO secretariat are unfolding to defuse developing country opposition to a comprehensive trade round seems to be to support market access campaigns launched by Oxfam and organizations such as the Cairns Group in order to pressure the big trading powers to accelerate the dismantling of quotas-and their replacement with other forms of protection like anti-dumping-so that they can increase their leverage on the developing countries to agree to more liberalization in areas deemed more critical to the WTO and the big trading powers, such as industrial tariffs, services, and the trade-related areas of investment, competition policy, government procurement, and trade facilitation. In other words, the WTO secretariat hopes to convince the big trading powers that by accelerating market access in areas they already agreed to years back, they will be able to extract concessions in the current and coming negotiations in those areas of greater strategic interest to their corporations, like investment and government procurement. This kind of strategic maneuvering on the part of the WTO is, in fact, something that Oxfam leaders like senior analyst Kevin Watkins are very much aware of. In a recent article on the EU's negotiating stance on services in the Guardian ("Money Talks", April 24, 2002), Kevin asserted that "When it comes to the negotiating table, the EU will demand market openings in services as a condition for opening its own markets in garments and textiles...we buy your bananas and shirts if you give our banks and insurance companies unrestricted access to your markets". Kevin's words make it even more puzzling why Oxfam would launch a campaign that could be easily co-opted into the WTO secretariat's game plan to achieve the comprehensive trade round that is its strategic goal. In conclusion, it was necessary and useful for Oxfam and its friends to have had this exchange. In Focus' view, however, it is time for the movement to move forward and forge a comprehensive strategy to foil the effort of the WTO Secretariat and the big trading powers to launch a new comprehensive round of trade negotiations at the 5th Ministerial of the WTO. Oxfam's participation in this coalition effort is something that is greatly desired. However, Oxfam can only be an effective partner if it first clarifies to itself and the movement where it really, really stands on the issues of globalization, trade liberalization, and the World Trade Organization. We hope that many more organizations can participate in this effort to define a much- needed strategy on the trade front. What we have laid out above is meant to spark and to contribute to this process, not serve as an end. It is important that discussion of the issues and directions is not limited to policy analysts but involves input from the grassroots, especially from social movements. The "Our World is Not for Sale" global coalition is one of the most promising venues for the process of building consensus among our ranks. The era of top-down, go-it-alone campaigns is over. Washington: Triumphant or Overextended? (May 2002)
Over eight months after the launching of the global war against terror, it is becoming increasingly clear that the US is caught in a relentlessly expanding conflict from which there is no easy withdrawal.
Trying to keep up the momentum of its war against terror after it declared "victory" in Afghanistan in early January, the US sent troops to the Philippines that same month to help hunt down members of the Abu Sayyaf bandit group that it alleged had ties with Osama bin Laden's Al-Qaeda network. The Philippines, an ex-colony, seemed to be a convenient choice as a site for expanding the war against terror as Washington debated from January to March a far more important question: whether or not to take out Saddam Hussein. But just as the faction favoring an invasion of Iraq appeared to have gained the upper hand, the brutal Israeli sweep into the West Bank threw a spanner on US calculations, which had rested on the assumption of political support from the pro-US Arab states. Vindication or Repudiation? Meanwhile, nearly three months after Washington's designating the Philippines a "second front", some 60 to 80 Abu Sayyaf bandits continue to elude 6,000 Filipino troops coached by 160 US advisers on the small island of Basilan. Moreover, the realities of the Afghanistan campaign that filtered out after the ouster of the Taliban have punctured the triumphalist mood that reigned last December. The idea that Afghanistan vindicated a new strategy of warfighting based on the employment of massive precision-guided airpower with little commitment of ground troops is now less persuasive. Thousands of civilians apparently died owing to less than precise bombing, and scores of people allied to the United States were targeted and killed by US forces acting on bad intelligence. Relying on Afghan mercenaries to do the fighting on the ground for the US is now acknowledged by some in the Pentagon to have resulted in Osama bin Laden's escape from the Tora Bora mountains. And when US troops did engage in close-quarters fighting with the Taliban/Al-Qaeda forces during "Operation Anaconda", which took place in the Shah-i-kot area near Pakistan in early March, they were bloodied by an enemy that was supposed to be on the run. As retired US Colonel David Hackworth put it in a television interview, the results of Operation Anaconda were "not something that the Pentagon can be proud of". Though it has not achieved its prime objective of capturing bin Laden or dismantling the Al-Qaeda network, Washington still thinks it has the strategic initiative. It seems to be the case, however, that it has launched itself into a multi-front war of attrition where it cannot consolidate victory on any front. The momentum is also being lost on the political front. As the military campaign lessened in intensity in Afghanistan, the United Nations was brought in to broker a political settlement that would usher in representative democracy while the European Union was dragged in to police the peace via a British-led armed contingent. It has become clear, however, that the centralized authority that had been forged by the Taliban has given way to the return of warlord hegemony in different parts of the country, and the role of the security force is increasingly to keep the ex-partners in the Northern Alliance from cutting each other's throats. "Quagmire" is a word that is more and more frequently used in the US press to describe the Afghan situation. As Afghanistan slides into anarchy, Pakistan's Gen. Musharraf has been destabilized and delegitimized by American pressure to take sides in the war against terror. The prestige of Islamic fundamentalists among the population is now probably greater than before September 11. Saudi Arabia is seething with discontent, and Washington faces the unpleasant prospect of having to serve ultimately as a police force between an increasingly isolated Saudi elite and a restive youthful population that regards bin Laden as a hero. Washington's tilt towards Israel has not helped in shoring up the legitimacy of its Arab allies, including Egypt's Hosni Mubarak, among their peoples. Israel is the great spoiler of the US effort to manage the Middle East, and it can get away with it because it can rely on its massive support in the US Congress to blunt pressure from the US executive, as the brazen Israeli moves to destroy the Palestinian Authority in defiance of Washington recently demonstrated. Overstretched? Indeed, the Afghan fiasco and Israeli intransigence, it can be argued, have combined to make Washington's strategic situation in the Middle East worse rather than better. Nor have there been any political or military gains in Southeast Asia, with Indonesia maintaining its distance from Washington and the US buildup in the Philippines turning out to be an open-ended commitment, like Vietnam. The introduction of US forces in Georgia and some of the Central Asian republics - the so-called "Stans" - may, on the surface, seem to be a strategic plus, especially when one takes into consideration the energy reserves of the area. However, with the failure to achieve decisive military or political victory on any front, Washington's Central Asian deployments may actually be stretching US imperial power, with little real strategic gain. Not surprisingly, there are voices in Washington that now question if the US has the troops and resources to engage in a multi-front war of attrition. An invasion of Iraq, even if it does oust Saddam Hussein, would merely exacerbate the dilemma of overextension, since once one goes into Iraq, there is, as in Afghanistan, no easy extrication from the massive political mess that would create. Paul Kennedy had a colorful phrase for Washington's emerging dilemma: "imperial overstretch". One is tempted to say, in fact, that there is a historical parallel to the US' indiscriminate creation of new fronts against terror, and that is the Japanese rampage through the Southeast Asia and the Pacific in the first six months of 1942. Large swathes of territory were gained, but at the price of overextending Japanese imperial power. By creating so many fronts, Japan ended up unable to concentrate its forces and attention on the few strategic sectors. Losers There are no clear winners so far in the so-called war against terror. But there are clear losers. The Taliban is one. The other big loser is liberal democracy in the United States. Not even the Cold War was presented in such totalistic terms as the "War against Terror". Laws and executive orders restricting the rights to privacy and free movement have been passed with a speed and in a manner that would have turned Joe McCarthy green with envy. The United States was scarcely three months into the war when legislation had already been passed and executive orders signed that established secret military tribunals to try non-US citizens; imposed guilt by association on immigrants; launched a massive effort to track down 8000 young Muslim men; authorized the Attorney General to indefinitely lock up aliens on mere suspicion; expanded the use of wiretaps and secret searches; allowed the use of secret evidence in immigration proceedings that aliens cannot confront or rebut; gave the Justice Department the authority to overrule immigration judges; destroyed the secrecy of the client-lawyer relationship by allowing the government to listen in; and institutionalized racial and ethnic profiling. Americans have often prided themselves with having a political system whose role is to maximize and protect individual liberty along the lines propounded by John Locke and Thomas Jefferson. That Lockean-Jeffersonian tradition has been severely eroded in the last few months, as Americans have been stampeded to giving government vast new powers over the individual in the name of guaranteeing order and security. Instead of moving to the future, America's limited democracy is regressing in its inspiration from the seventeenth century Locke to the sixteenth century Hobbes, whose masterwork Leviathan held that citizens owe unconditional loyalty to a state that guarantees the security of their life and limb. The extent to which efforts to curtail traditional liberties are facing acceptance was illustrated during a memorable Senate hearing when Attorney General John Ashcroft said that critics of the Bush administration's security measures were fear-mongers "who scare peace-loving people with phantoms of lost liberty [and] aid terrorists". The fact that liberal, Democrat senators against whom these remarks were directed dared not respond shows how skillfully the conservatives have used the anti-terrorist struggle to win the real war at home, which is the war against liberals and progressives. It is only recently that significant Democrats have moved to speak against curtailment of civil liberties, and rather timidly at that. To conclude, over six months after September 11, the US has failed to achieve a decisive victory in the war against terror and may now find itself in a situation of strategic overextension. The alienation that has fueled fundamentalism has, in contrast, gained in strength in the Middle East, greatly assisted in the last few months by Israel's acts of impunity against Palestinians. Southeast Asia is turning up into a strategic black hole swallowing up more and more American military manpower. But if there are no clear winners, there is, aside from the Taliban, a clear loser: civil liberties and democracy in the United States. And that is a pity. Revolution and Counter-revolution in Venezuela (July 2002)
The political reality of Venezuela hits me as soon as I arrive, like a blast of hot Caribbean air. A friendly question triggers a torrent of anti-Chavez denunciations from the young professional serving as my driver from the airport that only ends when he deposits me at the Hilton.
"We used to be a tolerant country", he claims. "Now Chavez has set the lower class against the middle class, the black people against the whites. Sure, there are a few abusive rich people, but it's not just them he's targeted. It's people like me. You know, middle class people, with an apartment, two cars, maybe a vacation outside the country once a year". "But beware", he cautions me as he drives off. "You'll meet him tomorrow night, and he can really be charming". A Second Bolivar? Indeed he is. At a banquet for participants at an international conference the next evening, Hugo Chavez, president of the Bolivarian Republic of Venezuela, is at his social, disarming best. Upon being introduced to me, he takes me by the hand, , pretending to lead me in the Filipino bamboo dance "tinikling", which he says he learned during a state visit to the Philippines. And far into the evening, he talks expansively on a wide range of topics, from his being saved and reinstalled by the poor in Miraflores, the presidential palace, during the failed coup of April 11-13, to his dream of integrating the petroleum industries of Venezuela, Brazil, and other oil producers in Latin America. Chavez' effusiveness is remarkable given the fact that Venezuela is on the brink of civil war. In this, he resembles his hero, Simon Bolivar, the larger-than-life Venezuelan who led the liberation of Spanish America in the early 19th century, who is said to have maintained an enthusiastic disposition even in the midst of the most trying political and personal crisis. A second coup attempt is said to be brewing among the "anti-Chavistas", which include the elite and middle class, the media, the hierarchy of the Catholic Church, and parts of the army. Caracas is filled with rumors-with two dates frequently cited as D-Day, July 5 and July 11. Gilberto Jimenez, a young Chavez partisan, discounts the rumors as the product of the middle class' "scaring itself". "It's like the talk about the "Bolivarian circles" arming themselves", he remarks, referring to the grasssroots institutions that Chavez' people have set up in the barrios or popular districts. "There's no truth to it. But they email this to one another, and pretty soon, they [the middle class] are talking about arming themselves". Failed Coup The class divisions in this country showed itself to the world as an ugly wound during the events of April 11-13. During a confrontation between opposition and government demonstrators on April 11, still unidentified gunmen fired into the crowd, killing 18, mostly pro-Chavez people. A few hours later, after army chief Gen. Efrain Vasquez demands Chavez' resignation, rebel officers and soldiers seize him at Miraflores and bring him, first to the Venezuelan army headquarters at Fort Tiuna, then to an island off the Venezuelan coast. A junta headed by Pedro Carmona Estanga, head of the Venezuelan Chamber of Commerce and backed by key generals and admirals, installs itself in power and unilaterally dissolves the National Assembly, Supreme Court, National Electoral Council, and all state and municipal governments. It also nullifies a package of 48 laws approved by the National Assembly that the right regards as a threat to the existing property system. It is a classic case of overreach. Angered by the brazen moves and refusing to believe that Chavez has "resigned", many military units declare for Chavez even as hundreds of thousands of poor people descend on central Caracas from the ranchos, or slums, surrounding the city, creating a critical mass that scatters the pro-coup forces. Recalling the events, Chavez tells us over dinner, "The government was weak, we were weak, but in our moment of need, the people came out to the streets and saved us". The event, says Peruvian sociologist Anibal Quijano, has significance beyond Venezuela, being "the first victory of the masses in the Americas and the world in a long, long time". In 48 hours, Chavez is back in power. Meanwhile, not a few institutions have egg on their face. The New York Times, for instance, editorializes in favor of the coup on Saturday, April 13, then retracts on Tuesday, April 16. Like the Times, the Bush administration blames Chavez for bringing the coup on himself, then begins to fudge as soon as he is back in power. But the damage is done. Many European and Latin American governments criticize the US for tolerating the overthrow of a democratically elected government. Indeed, many people, in Venezuela and outside, suspect the US had a hand in the coup, claiming that two US Navy officers were seen with coup leaders at Fort Tiuna on the night of April 11 and 12. The question is critical, but whether or not the US had a hand in developments, some sort of social confrontation was inevitable. Two Nations, One Country Venezuela is one of Latin America's most class-divided countries. It is estimated that 80 per cent of the people live in poverty, with the World Bank estimating that the share of the national income going to the lowest 20 per cent of the population is only 3.7 per cent, while that of the highest 10 per cent is 37 per cent. The vast wealth differentials were to some extent mitigated during the halcyon days of OPEC in the early 1980's, when some of the oil money did trickle down in a country that was then known as "Latin America's Saudi Arabia". But with the collapse of oil prices and the initiation of a wrenching structural adjustment program, Venezuela entered into permanent constant economic crisis since the mid-eighties. "It was spectacular", says Neils Liberani, a small businessman. "Per capita fell from nearly $2000 in the eighties to $110 today". The "Caricazo" of 1989, when people from the barrios descended on and rioted in the center and rich districts of Caracas in protest against fuel price increases demanded by the International Monetary Fund, is said to have been a determining event in Chavez' political evolution. Three years later, in February 1992, the young idealistic colonel led a failed coup in the name of the poor masses which was styled as a "Bolivarian military uprising". The coup failed, but it catapulted Chavez into the center of Venezuelan politics, and when he ran for president in 1998 on a platform of ending corruption and subordination to foreign powers and beginning a social revolution, he won handily, with some 56 per cent of the vote, drawing support even from sectors of the middle class that now oppose him bitterly. The last three years have indeed been revolutionary. Chavez pushed through a new constitution that was approved in a popular referendum. He formed a political coalition that won control of the National Assembly. The Assembly passed the famous package of 49 laws that included an agrarian reform law, a law to protect small fishermen, and a law limiting the role of the private sector in exploiting Venezuela's vast oil reserves. "Many people in the media at first criticized him for being merely rhetorical in his promises. But when he moved to create and implement revolutionary measures, these same people started to oppose him", says Jimenez. In foreign policy, Chavez' moves were equally bold. He was effusive in his admiration for Fidel Castro. He broke the embargo against state visits to Saddam Hussein. And he played a key role in uniting OPEC to manage oil production in order to stabilize the price of oil. These moves did not endear him to the United States. Indeed, Chavez' foreign policy is breathtakingly Bolivarian. Not only does he dream of a regionally integrated oil industry. He also speaks about a South Atlantic Treaty Organization that would have only Latin American and African members and would be geared to preserve the common security of the Southern countries. He has not hidden his skepticism about the Bush administration's Free Trade Area of the Americas proposal, and his aides say that it will not win approval in a referendum in Venezuela. Yet Chavez has his critics on the left was well. Some say he is too aggressive in personal style and too quick to brand those with legitimate criticism as "enemies of the people". Others say that he is too dependent on support on loyalist groups within the military, and this will be difficult to maintain given the middle-class origins of most officers. "These people have to live day to day in the midst of middle class people who hate Chavez", says a Chavez supporter who requested anonymity. Still others say that that he has not gone beyond charismatic populism to have a well-articulated program of change. As Anibal Quijano puts it, "'Chavismo' needs to be converted quickly into a genuine democratic process liberated from the mystical relationship of the dispersed and disorganized masses with a caudillo with the peculiar style of Chavez". Some say that while Chavez and his allies have begun to depersonalize and institutionalize the revolution via the formation of the Bolivarian circles, this comes comes rather late in the game. Revolution and Counterrevolution Whether late or not, the government is moving to organize popular power. The Bolivarian circles are seen as institutions of self-government, which are given exceptional latitude in determining projects and priorities. "People have to stop waiting for government to do things for them. They have to start doing things for themselves, with local government in a support role", says Freddie Bernal, the mayor of large low-income district Libertador and one of Chavez' most trusted aides. The revolution is real, but so is the counterrevolution. The atmosphere of high tension in Caracas reminds one of Santiago in 1973, when the elite and the middle class were massing in the streets demanding the ouster of the "dictatorial" government of Salvador Allende which had allegedly introduced "the politics of hate" in a once pacific country. The democratic rhetoric is the same, but then as now, in 1973 Chile and in 2002 Venezuela, the problem the right faces is that the revolutionary leader has been popularly elected. Moreover, the revolutionary constitution has been democratically approved. And the laws addressing the social inequalities have been passed by a democratic parliament. Then as now as well, the right is on strike economically, withholding hundreds of millions of dollars worth of investment or moving it offshore, thus worsening the economic crisis that Chavez inherited from previous administrations. "It's a self-fulfilling prophecy", says one pro-Chavez partisan who requested anonymity. "They refuse to invest, and when the crisis worsens, they blame it on Chavez. This is not to say that Chavez has not made mistakes. Some of his measures come across as being thought up by the IMF". Will there be another coup attempt? Martin Lopez, an anti-Chavez small businessman, says that the dominant tendency on both sides is to turn away from violence and towards negotiation. He is cautiously hopeful that a coming mission to promote dialogue headed by former US President Jimmy Carter will succeed. Many are less optimistic, noting that the opposition's main condition for starting dialogue - Chavez' stepping down - is a non-starter. What if there is another attempt by the opposition to violently seize power, I ask some people in the lower-class community of Nazareno, high up on one of the mountain slopes towering over downtown Caracas. Rosa Quintero, a woman of around 40 years of age, answers: "Look, we went down on April 12, not because we were looking for food or money", referring to the lower class mobilizations that reinstalled Chavez. "We went because we were fighting for our future. And we are prepared to do it again". The right's dilemma is that to reimpose control over Venezuela, it will have to do it over the dead bodies of thousands of poor people, including possibly that of Quintero. And that of Chavez, who, like his role model, is playing not only for the present but for history. "The mistake they made on April 11", he is reported to have remarked, "is that they did not kill me. They won't make it again. And I am prepared to die rather than betray our Bolivarian principles". And the US? The dilemma of Washington's ruling unilateralists is that while there is no easy, "non-messy" way of getting rid of a democratically elected president, they cannot afford to have another Fidel Castro in the region, especially a Fidel that reigns in a country that is the US's second biggest foreign oil supplier. Capitalist Crisis and Corporate Crime (July 2002)
The unraveling of the reputations of firms that were once the toast of Wall Street continues and the end is not in sight. But one thing is certain: already fragile prior to Enron, the legitimacy of global capitalism as the dominant system of production, distribution, and exchange will be eroded even further, even in the heartland of the system. During the halcyon days of the so-called "New Economy" in 2000, a Business Week survey found that 72 per cent of Americans felt that corporations had too much power over their lives. That figure is likely to be much higher now.
Like the massive overvaluation of stocks that led to the dot.com collapse on Wall Street in 2000-2001, corporate fraud was an essential feature of the "New Economy". To understand this, one must begin with two developments that were central to the dynamics of global capitalism in the 1980s and 1990s: finance capital's becoming the driving force of the global economy and the crisis of overcapacity or overproduction in the real economy. The last two decades saw the deregulation of financial markets, with barriers to the movement of capital across borders and across sectors - e.g., the US Glass-Steagall Act banning financial institutions from engaging in both investment banking and commercial banking - being progressively eliminated. The result was a tremendous burst of speculative activity that made finance the most profitable sector of the global economy. So profitable was speculation that in addition to traditional activities like lending and dealing in equities and bonds, the eighties and nineties witnessed the development of ever more sophisticated financial instruments such as futures, swaps, options-the so-called trade in derivatives, where profits came not from trading assets but from speculation on the expectations of the risk of underlying assets. The attractiveness of finance relative to other sectors of the economy, like trade and industry, was underlined by the fact that in the late 1990s, the volume of transactions per day in foreign exchange markets came to over $1.2 trillion, which was equal to the value of trade in goods and services in an entire quarter. With the speculative sector awash in cash, much of it from outside the US, industrial firms became more and more dependent on massive credit and the sale of shares for financing instead of on retained earnings. This dependence became even more marked in the late 1990's, as the boom of the Clinton years began to taper off. This boom had resulted in a burst of global investment activity that led to tremendous overcapacity all around. By the late 1990's, the indicators were stark. The US computer industry's capacity was rising at 40 per cent annually, far above projected increases in demand. The world auto industry was selling just 74 per cent of the 70.1 million cars it built each year. So much investment took place in global telecommunications infrastructure that traffic carried over fiber- optic networks was reported to be only 2.5 per cent of capacity. Retailers suffered as well, with giants like K-Mart and Wal-Mart hit with a tremendous surfeit of floor capacity. There was, as economist Gary Shilling put it, an "oversupply of nearly everything". Profits apparently stopped growing in the US corporate sector after 1997, leading firms to a wave of mergers, some motivated by the elimination of competition, others by the hope to extract renewed profitability from some mystical process called "synergy". The most prominent of these were the Daimler Benz-Chrysler-Mitsubishi union, the Renault takeover of Nissan, the Mobil-Exxon merger, the BP-Amoco-Arco deal, the blockbuster "Star Alliance" in the airline industry, the AOL Time Warner deal, Worldcom's takeover of long distance carrier MCI. In fact, many mergers ended up consolidating costs without adding to profitability, as was the case, for instance, with the much-ballyhooed AOL Time Warner deal. Where mergers could not be effected, cutthroat competition ruled, resulting in bankruptcies such as that of giant retailer K-Mart. With profit margins slim or nonexistent, survival increasingly meant greater and greater dependence on Wall Street financing, which increasingly came under the sway of hybrid investment-commercial bankers like JP Morgan Chase, Salomon Smith Barney, and Merrill Lynch, which aggressively competed to put together deals. With little to show in terms of an attractive bottom line, some firms took the route of trading future promise for hard cash in the present, something that creative investment managers were especially good at in the high tech sector. It was this seemingly innovative technique of trading on illusion that resulted in the stratospheric rise of share values in the high technology sector, where they lost all relation to the real state of companies. Amazon.Com, for instance, saw a constant rise in its share values even as it had yet to turn a profit. Other start-ups lost all connection to production and served mainly as mechanisms to inflate share prices to enable venture capitalists and managers with stock options to make a killing from an early sale, after which the firm was left to languish and eventually collapse. But in the end, trading on illusion could only get you so far. Reality intervened in 2000, resulting in the wiping out of $4.6 trillion in investor wealth in Wall Street, a sum that, as Business Week pointed out, was half of the US Gross Domestic Product and four times the wealth wiped out in the 1987 crash. Its boom extended artificially for three or four years by the dot.com craze, the US economy entered into recession in 2001. And precisely because reality was masked so long by the illusion of prosperity, the longer it would take to rectify the massive structural imbalances that had built up, if at all. In the end, there was no getting around the fact that your balance sheet had to show an excess of revenue over costs to continue to attract investors. This was the simple but harsh reality that led to the proliferation of fancy accounting techniques such as that of Enron finance officer Andrew Fastow's "partnerships", which were mechanisms to keep major costs and liabilities off the balance sheet, as well as cruder methods like Worldcom's masking of current costs as capital expenditures. In the context of deregulation and the benign approach to the private sector that accompanied the reigning neoliberal, "hands-off-business" outlook, it was easy for such pressures to erode the so-called "firewalls" - between management and board, stock analyst and stockbroker, auditor and audited. Faced with the common specter of an economy on the downspin and slimmer pickings for all, the watchdogs and the watched threw off the pretense of being governed by a system of checks and balances and united to promote the illusion of prosperity-and thus maintain the financial lifeline to unsuspecting investors-as long as possible. This united front could not be maintained for long, however, since it was very tempting for those who knew the real score to sell before the mass of investors got wise to what was happening. In the end, business acumen was reduced to figuring out when to sell, take the money, and run... and avoid prosecution. Enron CEO Jeffrey Skilling read the handwriting on the wall, resigned, and made off with $112 million in the sale of his stock options a few months before the fall. Not so lucky was Tyco's Dennis Kozlowski, who was not content with raking off $240 million and was still trying to milk his cash cow when his company went under; he is currently under prosecution for tax evasion. More culprits will be unmasked no doubt, and who knows, the cast of odious characters may ultimately even include George W. Bush and Dick Cheney. But it is worthwhile to remember that while there are villains aplenty, it is the dynamics of the system of deregulated, finance-driven global capitalism that is the central problem, and this is not something that can be banished by Georgian pieties like "There is no capitalism without conscience", or addressed with quaint solutions like "good corporate governance". In the meantime, foreign investors are fleeing the US, the dollar is on a downspin, and the overhang of overcapacity is greater than ever. The mixture of this deepening structural crisis of the economy with the crisis of legitimacy of neoliberal capitalism promises a volatile future indeed. A Global Conjuncture: The Multiple Crises of Global Capitalism (August 2002)
The spectacle of unending scandals in Wall Street is part and parcel of what is shaping up as the worst crisis of global capitalism since the Great Depression 70 years ago. Charting the direction for the future is greatly dependent on understanding the nature and dynamics of this crisis. We are talking about a big Crisis that is the intersection of four crises.
Crisis of legitimacy The crisis of legitimacy refers to the increasing inability of the neoliberal ideology that underpins today's global capitalism to persuade people of its necessity and viability as a system of production, exchange and distribution. The disaster wrought by structural adjustment in Africa and Latin America; the chain reaction of financial crises in Mexico, Asia, Brazil and Russia; the descent into chaos of free-market Argentina; and the combination of massive fraud and spectacular wiping out of $7 trillion of investors' wealth - a sum that nearly equals the annual gross domestic product (GDP) of the United States - have all eaten away at the credibility of capitalism. The institutions that serve as global capitalism's system of global economic governance - the International Monetary Fund (IMF), the World Bank, and the World Trade Organisation (WTO) - have been the most negatively affected by this crisis of legitimacy and thus stand exposed as the weak link in the system. A sure sign of the profound crisis of legitimacy appears when the system loses its best ideologues. Among the "best and the brightest" who have deserted are Jeffrey Sachs, the author of the "shock treatment" of Eastern Europe in the early 1990s who now calls for non-payment of their debts by developing countries; Joseph Stiglitz, the former World Bank Chief Economist, now the severest critic of the IMF; Jagdish Bhagwati, who coined the term "Wall Street-Treasury Complex" to describe the interests that brought on the unending stream of global financial crises since the 1990s; and George Soros, capitalist par excellence who doubles as the enemy of "market fundamentalism". Crisis of overproduction Intersecting with the crisis of legitimacy is a crisis of overproduction and overcapacity that could portend more than an ordinary recession. Profits stopped growing in the US industrial sector after 1997, a condition caused by the massive overcapacity that had built up throughout the international economic system during the years of the US boom in the 1990s. The depth of the problem is revealed by the fact that only 2.5 per cent of the global infrastructure in telecommunications is currently utilised. Overcapacity has resulted in investment moving from the real economy to the speculative economy, to the financial sector, a development that was one of the factors behind the stock market bubble, especially in the technology sector. Enormous surplus capacity continues as a global condition, and thus the continuing absence of profitability. The global recession is, as a result, deepening. But precisely because severe imbalances had built up for so long in the global economy, this recession is likely to be prolonged, it is likely to be synchronised among the major centres of capitalism, and there is a great chance that it could turn into something worse, like a global depression. Crisis of liberal democracy Running alongside and intersecting with these two crises is a crisis of liberal democracy, which is the typical mode of governance of capitalist economic regimes. In places like the Philippines and Pakistan, popular disillusionment with elite democracies fuelled by money politics is rife among the lower classes and even the middle class, being in the case of Pakistan one of the factors that allowed General Musharraf to seize political power. Clearly, from Africa to Latin America, the phenomenon of the spread of Washington-type or Westminster-type formal democracies that American political scientist Samuel P. Huntington called the "third wave of democratisation" is over. But the crisis of legitimacy is not limited to the South. In the US, there is a widespread popular perception that, owing to massive corporate influence over the two political parties, plutocracy is now the US system of governance, not democracy. Mass disaffection and cynicism have been compounded by the feeling of a vast sector of the electorate that President George W. Bush stole the 2002 elections and, thanks to current revelations about his questionable ethics as a businessman, that he serves mainly as the president of Wall Street rather than of the country. Despite Washington's current posturing about punishing corporate fraud, the spectacular developments in Wall Street are perceived as a moral collapse in which both economic and political elites are implicated. In Europe, there is also much concern over corporate control of political party finances, but even more threatening is the widespread sense that power has been hijacked from elected national parliaments by unelected, unaccountable Eurobodies like the European Commission. Electoral revolts like the Le Pen and Pim Fortuyn phenomena in France and the Netherlands respectively are manifestations of deep alienation from technocratic democracy. Overextension The fourth crisis might not be immediately discernible, but it is operative as well. The recent expansion of US military influence into Afghanistan, the Philippines, Central Asia and South Asia may communicate strength. Yet, despite all this movement, the US has not been able to consolidate victory anywhere, certainly not in Afghanistan, where anarchy, and not a stable pro-US regime, reigns. It is arguable that because of the massive disaffection they have created throughout the Muslim world, the US' politico-military moves, including its pro-Israel policies, have worsened rather than improved the US strategic situation in West Asia, South Asia, and South-East Asia. Meanwhile, even as Washington is obsessed with terrorism in West Asia, political rebellions against neoliberalism are shaking its Latin American backyard. Anti-corporate globalisation movement These intersecting crises are unfolding even as the movement against anti-corporate globalisation is gaining strength. During the 1990s resistance to neoliberalism was widespread throughout the South and the North. In few places, however, were they able to become a critical mass at a national level as to reverse neoliberal policies decisively. But although they were not a critical mass nationally, they could become a critical mass globally when they came together at certain critical events. This was what happened in Seattle in December 1999, when massive mobilisations contributed to bringing down the Third Ministerial of the WTO. The other global confrontations of 2000, from Washington to Chiang Mai to Prague, also shook the confidence of the establishment. When the World Social Forum was launched in Porto Alegre in January 2001, with 12,000 people in attendance, the ideological challenge became a very real threat to global capitalism. Today, we may be witnessing a second moment in the trajectory of the resistance as many anti-neoliberal movements become a critical mass impacting on politics at the national level. This appears to be the case in Latin America, where espousal of neoliberal economic policies is now a surefire path to electoral disaster and progressive movements have either won electoral power or are on the cusp of power in Venezuela, Brazil and Bolivia. Competing with the Right Nevertheless, the crisis does not guarantee ultimate ascendancy for the forces against neoliberalism on the Left. For the Right is also on the move, taking advantage of the crisis of the neoliberal establishment to concoct ideological mixtures of reaction and populism that stoke the deepest fears of the masses. Note, for instance, the mass resonance of the fascist Le Pen's slogan: "Socially I am left, economically I am right, and politically I am for France". With neoliberal ideology in retreat, the competition for the disenchanted masses is shaping up as an apocalyptic contest between the Left and the Right, though at this point one cannot definitively discount an ideological comeback by the global establishment. Coming: the Battle of Cancun In short, the immediate future promises a very fluid situation. In this regard, the Fifth Ministerial of the WTO in Cancun, Mexico, in September 2003, is shaping up as a confrontation between the old order and its challengers on the Left. Because of its decision-making structure, which is based on "consensus" among all member-countries, the WTO is shaping up as the weak link of global capitalist system, much like Stalingrad was the weak link in the German lines during the Second World War. For the establishment, the aim is to launch another ambitious round of trade and trade-liberalisation in Cancun that would rival the Uruguay Round. For its opponents, the aim is to reverse globalisation by turning Cancun into the Stalin-grad of the globalist project. In the space of just a decade, global capitalism has passed from triumphalist celebration of the passing of the socialist states of Eastern Europe to a fundamental loss of confidence. It is entering a "time of troubles" much like the second and third decades of the 20th century. Its successful emergence from the developing crisis is by no means assured. Johannesburg Junction (September 2002)
Ten years after the Rio de Janeiro Conference on Environment and Development, the global environmental situation is unarguably worse. The main culprit: an unchecked capitalist mode of production that unceasingly transforms nature's bounty into commodities and incessantly creates new demands. Capitalism constantly erodes man and woman's being-in-nature (creature) and being-in-society (citizen) and, even as it drains them of life energy as workers, it moulds their consciousness around one role: that of consumer. Capitalism has many "laws of motion", but one of the most destructive as far as the environment goes is Say's law, which is that supply creates its own demand. Capitalism is a demand-creating machine that transforms living nature into dead commodities, natural wealth into dead capital.
Capitalism has expanded unevenly, being now overdeveloped in its heartland in the North and underdeveloped in the periphery. Thus its environmental impact has likewise been differentially distributed. Nothing captures this better than the difference in per capita greenhouse gas emissions: one American emits as much as 17 Maldiveans, 19 Indians, 30 Pakistanis, 49 Sri Lankans, 107 Bangladeshis, 134 Bhutanese, and 269 Nepalis. The global impact of the superdeveloped capitalist North may, in fact, be greater than the comparative statistics reveal. For in response to the rise of the environmental movement, the North has displaced ecological disequilibrium to the South. Perhaps paradigmatic in this regard is the way Japanese capital has lived up to environmental standards in the homeland by accelerating its consumption of nature and creation of waste to East and Southeast Asia. Japanese consumption, for instance, was responsible for up to 70 per cent of timber logged-most of it illegally-in the Philippines from the fifties to the nineties. Japanese consumption of commodities produced from a safe distance drove the uncontrolled toxification that accompanied the massive transfer of Japan's pollution-intensive and labor-intensive manufacturing facilities to that region beginning in the late 1960s. Today, European and US capital have joined Japanese capital in making cheap-labor, pollution-friendly China both the workshop and the wastebasket of the world. What is happening to China and East Asia today is, however, only the latest phase of capitalist globalization's 150-year-old process of displacing the environmental costs of global capitalist production and consumption from the center to the subordinate parts of the world economy. Ten years ago, George Bush Senior torpedoed the Rio Summit by saying "America's lifestyle is not up for negotiation". The Europeans and the Japanese feigned horror, but the next ten years showed that consumption was king for them too, and that ever escalating consumption was the common recipe for keeping the global capitalist economy going. The Group of Seven has essentially served as a forum to negotiate which capitalist center would serve at which period as the consumption-engine of the global economy. The so-called management of the international economy is essentially a process of determining which center would accelerate its conversion of nature into commodity and commodity into waste. Today, the Johannesburg Summit is stillborn, killed over a year before it was held by George W. Bush's decision to withdraw the world's prime capitalist power from being party to the Kyoto Climate Change protocol. This is capitalism stripped of its liberal face, capitalism that reveals its essential nature as an enemy of nature. The Japanese and European elites pretend to be upset, but what they are most upset about is the Americans' frank acknowledgment of the basic dynamic of the system of production they all share: that its continuing expansion must be achieved via an accelerated consumption and toxification of nature. Johannesburg will be a mixture of corporate greenwashing, American bullying, European holier-than-thou posturing, third world leaders begging for aid in return for more pro-corporate liberalization, and the World Trade Organization hijacking the environment in the service of free trade. It is one more UN conference bound for ignominious failure. This failure comes at a time when Latin America is exploding in rebellion against neo-liberal economics and lack of accountability and systemic corporate criminality has eroded the credibility of corporate capitalism in the United States, with 72 per cent of Americans feeling that corporations have too much power over their lives. It comes at a time when, owing to the crisis of overproduction or overcapacity, global capitalism's ability to consume its way out of crisis is stymied. The US, Japan, Europe, and East Asia-the engines of consumption-driven growth-now face the spectre of a synchronized downspin. What analysts from Marx to Schumpeter have discerned as self-destructive dynamics of the capitalist system is developing as nature's revolt becomes more and more evident each day and as consumers throughout the world are turning into citizens determined to regain community, to recreate a social solidarity that has been undermined by capitalism. Johannesburg may well be remembered a significant signpost in the struggle between capitalism and the environment, capitalism and community. Which side will prevail remains to be seen. East Asia's Future: Strategic Economic Cooperation or Marginalization? (September 2002)
As Asia is dragged down by the global economic downturn, regional cooperation or regional integration is an idea that is again on the agenda. Tighter links between Japan and Southeast Asia was the theme sounded by Tokyo earlier this year. There was, however, something desperate about the call. A Vietnamese official commented that it seemed to be a hastily put together affair that was all show and little substance whose main purpose was unstated, and that this was to counter the proposal floated by China last October to form a free trade zone with Asean.
The proposal for accelerated strategic economic cooperation is one that should have been floated at least a decade ago, when Japan, South Korea, and Asean were enjoying a degree of growth and prosperity. Now the Japanese economy and the Asean economies are in deep crisis, providing the most difficult context for negotiating closer economic relationships. A decade has been wasted that could have been devoted to arriving at some form of economic arrangement that would have carried forward and transformed the informal integration that had already gone moved apace in the 1980's. Why? Fear of Washington The fault lay on both sides. In the case of Japan, it was fear of Washington. The early nineties were the years when Apec was being pushed by the US and Australia as a trans-Pacific free trade area. Japan wanted to stop the Apec blueprint, but it did not want to antagonize Washington by openly endorsing an opposing mode of regional integration. It wanted especially to distance itself from anything that might be seen as supporting the proposal for an East Asia Economic Grouping, a vision of a unified economic bloc involving Asean, China, the Koreas, and Japan proposed by Prime Minister Mahathir of Malaysia. Far more serious in its consequences was Japan's failure to carry through with its proposal for the creation of an Asian Monetary Fund, which would have pooled together the reserves of the more prosperous countries to serve as a pool of funds which members whose currencies were under speculative attack could have access to. The damage done to the credibility of Japan by its backing down on this issue was very great. Many Asian governments thought that with the establishment of the Fund, the outcome could have been very different. Instead they were left to the mercy of the IMF and Washington, split in their strategies for survival, with only Malaysia brave enough to follow a path that defied the IMF. It is true that funds were later allocated to the region under the Miyazawa Plan, but this was only under the framework of IMF stabilization programs and only after the big Asean economies had gone under. It was a terrible diplomatic debacle for Japan, and one which reinforced the perception of many Asians that Tokyo had not shaken off the psychology of the Occupation when it came to dealing with Washington. ASEAN: Loss of Direction The Asean governments were not without fault in the process, however. They supported the Asian Monetary Fund for obvious reasons, but except for Mahathir, there were no leaders or governments that were really serious about moving on to more advanced levels of integration and coordinated economic policies. One can say that they were satisfied with the level and the mode of informal integration that had already been achieved at the level of manufacturing and saw no good reason to move further or to formalize economic institutions that would govern the level of integration already achieved. Perhaps the hesitation sprang from the fact that the Asean governments were themselves having problems carrying through their integration at the Asean level. It is true that in the early nineties, the Asean Free Trade Area (Afta) had been negotiated, but in the beginning this was largely as a defensive move, in response to the threat of an Apec free trade area. However, the pace of actual trade liberalization was quite slow throughout the nineties. Indeed, it was hardly proceeding at all, owing partly to the desire of the different governments to protect their prized agricultural commodities and their industrial elites. As for industrial integration, programs such as the Asian Industrial Complementation Scheme had either withered on the vine or had been utilized mainly by Japanese corporations to rationalize the distribution of the industrial plant they were in the process of moving from Japan to Southeast Asia. Industrial integration was in progress, but it was one that followed the logic of subsidiarization of Toyota, Nissan, and Matsushita, and Fujitsu, one which was directed at creating a manufacturing base from which to assault the US market without being subjected to US sanctions. This was hardly the integration that the founders of Asean had in mind, but it was one which their successors allowed to transpire owing to their own lack of capacity to pursue a different project. The failure of a more directed industrial integration showed that in contrast to the late sixties, Asean was unsure of where to bring trade and industrial cooperation in the 1990's. It is fair to say that there were two directions that existed, and that the tension between the two had never been really resolved. One direction saw the reduction of trade barriers among the Asean countries as a prelude to their participation in a broader free trade area like Apec, in a word as a step towards global free trade. One might say that the technocrats in Singapore and Manila thought in this fashion. The other direction was followed by those who saw the lowering of tariffs against one another as a move towards a different strategic objective, which was that of creating a large, protected regional market that would serve as a base for regional import substitution. This use of trade policy for industrialization, which many technocrats in Indonesia and Malaysia shared, was, in fact, the original thrust of the United Nations-sponsored "Robinson report" that had served as the intellectual and policy inspiration for Asean in the early sixties. For all intents and purposes, Asean remained primarily a political project, and in contrast to the lagging Afta, the expansion of the Asean Regional Forum (ARF) absorbed the energies of Asean governments in the mid to late nineties, that is, until the Asian financial crisis decisively disrupted the ambition of Asean to play effective balance-of-power politics among China, Japan, and the United States. Fatal Flaw Perhaps a fatal problem in Asean that would also dog other projects such as the Asian Monetary Fund, East Asia Economic Grouping, and the Asean plus three currency arrangement (plus Japan, Korea, and China) is that it remained an elite project. The nature, purpose, and directions of these groupings were discussed mainly among technocratic and political elites. The people were never brought into the equation in terms of mobilizing them to support these arrangements. The Asean project, for instance, was never democratized, and this failure did not stem from the so-called authoritarian-democratic divide among the Asean governments. Neither the democratic Philippine government under Cory Aquino or Fidel nor the authoritarian Indonesian government under Suharto was really interested in involving their citizens actively in the Asean enterprise. Not surprisingly, "Asean brotherhood" remains a big joke, except perhaps among chief executives and diplomats. In fact, although it was established much later than Asean, the regional trading group Mercosur in Latin America enjoys a greater resonance in the popular consciousness of the citizenries of the participating governments than Asean among the peoples of Southeast Asia. The problem in not bringing along people actively is that once the will at the top falters, there is no momentum below to keep things moving. The obverse of this is illustrated in the European Union-if you move too fast at the top and don't bring people along, they'll slow you down at some point, as the Danes and other citizenries did to the European Union after Maastricht Treaty. Strategic Cooperation and Survival There is widespread realization in governing, economic, and academic circles by now that without closer regional ties, most East Asian countries will be marginalized in a 21st century global economy dominated by big blocs such as the European Union and North American Free Trade Area. Some say that only China and India have the requisite combination of people, capital, skills, resources, and political strength to attain the status of effective players. The need for closer strategic economic coordination and integration is not simply a response to the volatile character of the global economy but to the intensely competitive superpower economics that has been unleashed by the United States, especially since the end of the Cold War. Cooperation and competition have marked the economic relationship between East Asia and the United States since the end of World War II, but whereas one can say that prior to the end of the Cold War, cooperation predominated owing to the priority of the anti-communist alliance, since the early 1990's, competition if not antagonism has become the dominant feature of the relationship. Keeping Asia weak politically, economically, and militarily became in the course of the 1990's the key strategic thrust of US policy in the region. Necessary Conditions for Success What are some of the necessary conditions for a successful move toward a regional economic bloc? There are at least four, some of which have already been touched on indirectly in the analysis given above.
1. First of all, Japan has to shake off the deep dependency it has on Washington and move towards decisively representing the regional interest. This is the critical decade, when Japan has to choose between Asia and Washington. Sticking to the old policy of subservience towards Washington's dictates will guarantee slow-motion marginalization as an economic power.
Mobilizing people in support of a project of a regional integration will necessitate not just promises from above but making sure that among the institutions created will be those that will allow participation of labor unions, peasant organizations, environmental organizations, and other civil society organizations in decision-making. The days when technocrats, politicians, and industrial elites monopolized decision making when it came to regional coordination are over. Whatever one thinks about civil society groups or NGOs, they are on the rise and they will make tremendous demands for inclusion in decision making in this decade. Asians have to learn from the experience of the European post-Maastricht that regional integration carried out with marginal participation from electorates and civil society ultimately backfires. Finally, any Asian economic bloc that emerges must not only include Asean, Korea, and Japan. It must most definitely include China. A regional enterprise that excludes China would eliminate one of the key sources of economic dynamism in the region. Being one of the centers of sustained growth, China's role in reflating the regional economy in what is threatening to be a decade of global deflation and recession cannot be understated. Of course, there are major problems that have to do with comparative labor costs, investment competition, and export competition that need to be sorted out, but these must be the subject of negotiations within a broader framework of strategic cooperation. Keeping China out of any regional arrangement on the grounds that it is too big will simply play into the hands of Washington's strategy of playing off the countries in the region against one another in order to keep Asia divided and weak. Unraveling of the Atlantic Alliance? (September 2002)
"Germany Isolated for Iraq Stance". This headline, blared across the US in the last few weeks, stands as a classic illustration of how Orwellian American journalism is these days.
Germany isolated? One does not get this from US polls, which indicate that the majority of Americans feel that President George Bush has not made the case for war on Iraq. Nor does one get this impression from Europe, where most people are against Washington's war plans. If anything, it is Gerard Schroeder, whose coalition recently won the German elections, who is in step with the vast majority of Europeans, and Tony Blair, George Bush's loyal helper, who is out of step, even in Britain. During a recent book tour in Italy, the question I was asked most frequently, by both journalists and audiences, was whether waging war on Iraq would allow the US to revive its faltering economy, which almost everybody assumed was the motive behind Washington's drive to invade Iraq. Upon hearing of the trans-Atlantic flap over the German Justice Minister's remark comparing Bush to Hitler, Europeans in a civil society gathering in Copenhagen registered agreement, with one person commenting that the official's only mistake was telling the truth without first checking if there were reporters. Extinguishing Sympathy A year ago, sympathy for the US was perhaps at its highest point during the post-War period. The French daily Le Monde was moved to declare, in distinctly un-Gallic fashion, "We are all Americans now". The inhabitants of a village in Kenya donated their highest form of wealth-cattle-to New York. Though some pointed out that 11 Spetember was rooted in historical injustices against the Islamic and Arab worlds, almost everybody on the left globally condemned the attack on the Twin Towers as despicable. How did the US squander such goodwill and create a situation, one year later, where it stands more isolated than before 11 September? How did Washington manage the feat of pushing the Euro-American political and ideological alliance that sustained western hegemony over the rest of the world for most of the post-war period to the edge of the precipice? There are many reasons, but three stand out. Instead of taking the road of using legal mechanisms to bring the perpetrators of the attackes on the World Trade Centre and the Pentagon to justice, as it did with Libya over the Pan Am Lockerbie bombing, Washington chose to unilaterally bomb, invade, and destroy a country. "Liberated Afghanistan" has become synonymous with a Hobbesian world where all are engaged in a war against all. Instead of taking a serious look at Arab and Muslim grievances against the West, the US refused to give them even the slightest recognition, putting itself instead 100 per cent behind Israel's effort to bomb and bulldoze the Palestinians into submission. Instead of welcoming the International Criminal Court and the Kyoto Protocol on Climate Change as major steps forward in global governance, Washington airily refused to be party to these institutions. The arrogance of Bush administration officials stems from a view that is best expressed by Robert Kagan, one of the right's reigning intellectuals, who dismisses multilateralism as the weapon of "weak" Europeans seeking to constrain a muscular Washington that is intent on imposing a global order from which Europeans themselves benefit. Iraq: The Breaking Point? The debate over Iraq has simply crystallized a divergence in interests and values that has been growing over the last few years. Writing in the current issue of Foreign Policy, Andrew Gowers, editor of the Financial Times, argues that the rift is indeed very deep. The Euro-American alliance, he claims, "is in trouble-deeper trouble than the leaders of the community seem prepared to admit. The commonality of views that bound the United States and Europe together is fading. Since 11 September 2001, after a brief flurry of togetherness, they have been unmistakably drifting apart. The sense of a terrorist threat has initiated a profound transformation in US foreign policy, but one that Europeans do not share and do not begin to understand. This misunderstanding is mutual. It affects all aspects of international relations, from mediation (or lack of it) in the Middle East to cooperation (or the lack of it) in defense and from disruptions of trans-Atlantic trade to policy on weapons of mass destruction". In this view, the "isolated" Schroeder position on Iraq has simply been the most dramatic step in a longer process. The US may yet get its way and intimidate European governments in a war against Iraq. This will merely, however, accelerate the unraveling of the Atlantic Alliance. While there are those on both sides of the Atlantic that mourn the fading away of the Alliance, it is, in fact, a positive step for most of the world. It opens up the possibility that Europeans will begin to grapple in a serious way with the problems of injustice and poverty in the developing world by addressing the structures of western domination that are largely responsible for. It paves the way for innovative global alliances that can be beneficial for most of the world, including the eventual formation of a Europe-Africa-Latin America-Asia alliance against US hegemony. Of course, Europe has had its own set of oppressive practices, such the Common Agricultural Policy, which is one of the biggest causes of agricultural disruption in the developing world. Its corporations are often as exploitative as American corporations. And its restrictions on migrants are often more draconian than Washington's. However, the need to seek allies in countering Washington's unilateralism may serve as an incentive to begin to reform these institutions. Living in a cocoon of relative prosperity, Europe long regarded itself as a junior partner of America. Now Europeans are beginning to feel a little bit of what the rest of us have felt all along: exploited, marginalized, ignored. As Washington structures its relationship with the globe in the Kaganian image of a lonely imperial power surrounded by numerous jealous but weak rivals, we say to Europe: "Welcome to the rest of the world". Brazil on Treshold of New Era with Lula Victory (October 2002)
As the countdown to Brazil's final round of elections begins, it is no-holds-barred campaigning on television. With Luis Inacio da Silva of the Workers Party (PT) widening his lead in the polls over Jose Serra of the Social Democratic Party of Brazil (PSDB), the reigning coalition is throwing everything, including the kitchen sink, at the former metalworker. Some television spots depict states and cities governed by the PT as garbage dumps, complete with scavengers and dogs. Others cut from da Silva- more popularly known as Lula-delivering a militant speech to workers to him charming businessmen with more moderate message, followed by the question "Who is the real Lula?" Then there is unadulterated scaremongering: Serra warning the electorate that Lula's economic policies are similar to those of President Hugo Chavez in neighboring Venezuela, which is in the midst of bitter class warfare and on the brink of civil war.
But Lula gives as good as he gets. Clinton-like, he ties around his opponent's neck the collapse of the Brazilian economy during President Fernando Henrique Cardoso's administration, which Serra has served as Planning Minister. Pounding on the government's record, he forces Serra to run what one commentator has called a "schizophrenic" campaign, unable to defend Cardoso's policies yet unable to distance himself from them. Perhaps as decisive as substance in the electoral homestretch is Lula's telegenic edge: in contrast to the boring Serra, the ex-factory worker is perfect for the medium, down to the mischievous wink that establishes an intimate tie between him and the viewer. The atmosphere in this country of close to 175 million is electric as it awaits something truly historic. According to Candido Grzybowski, head of a social policy think tank in Rio de Janeiro, Lula's victory would represent a "new stage of the national project, where the poor, the marginalized, the workers become the driving force in the rebuilding of the nation". Citing the Italian thinker Antonio Gramsci, he says, "There are times when an individual becomes himself the project. This is one of those times". Origins Starting out as an impoverished migrant from the Northeast, Lula entered political life as the feisty head of a metalworkers' union in San Bernardo de Ocampo, one of the proletarian strongholds in the vast Sao Paulo industrial belt. Persecuted by the military government, he came into prominence as a mass leader at a time when social struggles were gathering the momentum that would eventually displace the dictatorship and establish social movements as a key actor in Brazilian political life. The PT, which Lula helped found in 1980, was one of the points of confluence of the struggles of workers, peasants, urban poor, the progressive intelligentsia, and Church activists. Over the last 22 years, the PT under Lula's leadership has developed a distinctive elan, one that combines the fervor of an insurgent movement with the hard-nosed pragmatism of an electoral party. It is perceived as a non-traditional party that is solidly rooted in the masses and uncorrupt. It is seen as innovative, with its experiment in "participatory budgeting" in the city of Porto Alegre widely known not only in Brazil but the world over. It is also seen as tough on crime and drugs: the PT Governor of Rio de Janeiro Benedita da Silva has probably swung many urban voters to Lula's side with her uncompromising war against Rio's powerful drug lords, who have retaliated by sending motorcycle gangs to shoot up government offices and shopping centers and threatening to kill her. Unlike other parties on the left, the PT is seen as non-doctrinaire and flexible. "The party started out quite sectarian", recounts Kjeld Jacobson, head of the international relations department of the Central Federation of Workers (CUT). "But it soon learned that to win elections it had to make alliances. Without these alliances, the most you could get was only one third of the vote, so if you wanted to win elections, you had to win the center". The PT "formula" has been immensely successful, with the party not only winning governorships in key states and cities but also becoming the party with the largest number of deputies in the Federal Chamber of Representatives, today claiming 99 out of the 500 members of that body. As important as winning elections is the experience gained in mastering the intricacies of legislation and managing Brazil's unwieldy municipalities, cities, and states. As it prepares to conquer executive power, the PT, contrary to the propaganda of the Cardoso government, is a tested force. Altering the Political Landscape In the current elections, the PT's sophisticated-some would say, opportunistic-alliance-building has altered the political landscape. One result is the fragmentation of the political and economic establishment. The PT vice presidential candidate, Jose Alencar, is a textile entrepreneur who has headed up the Federation of Industries of the state of Minas Gerais. Critical backing for Lula comes from the Liberal Party, which is dominated by Christian evangelicals, who make up 12.5 per cent of the population. Among the key Lula backers are well-known politicians from the center-right and right, like former President Jose Sarney and the notorious hardline conservative kingpin from the Northeast Antonio Carlo Magalhaes. Lula's success in winning over key sectors of the business, says Jose Correa Leite, a leader of the civil society movement ATTAC, stems from his ability to convince them that he will inaugurate a new era of "national capitalist development" that would protect and reconcile their interests with those of the lower classes. Taking advantage of the cross-class distress caused by eight years of neoliberalism, Lula has managed the feat of uniting the peasants, urban poor, workers, middle class, and fractions of the elite behind a distinctly non-radical program of reviving the Brazilian economy via an expansion of domestic demand and stimulating national industries. Indeed, during the campaign, the details of the program have been given less prominence by the PT than the spirit of a civic cross-class nationalism that is captured in the main campaign slogan "For a decent Brazil". Such broad cross-class electoral alliances are not unique in the history of Brazil and Latin America. What is distinctive this time, according to PT partisans, is that the center of gravity of the alliance lies in the lower classes and marginalized groups Still, there are those in the Lula camp who wonder if this is in fact the case, who miss the strong laborist bias of the old PT, and who speak apprehensively about Lula's "capitalist-worker alliance". Like everybody else in the party, however, their doubts are, for the moment, happily suspended in anticipation of a Lula victory. The Neoliberal Debacle To many, Lula's being at the cusp of power stems partly from what prominent Brazilian political scientist Emir Sader describes as the "resounding collapse" of the economic project of Fernando Henrique Cardoso, the distinguished left-wing intellectual who transmogrified into a proponent of neoliberalism, friend of transnational corporations, and ally of the United States. So great is Cardoso's loss of credibility that even his party's candidate has rarely asked him to make a campaign appearance for him. According to University of Rio de Janeiro economist Reinaldo Goncalves, a comprehensive index that takes into account key items like the public debt, external debt, inflation, inequality, and unemployment would "unambiguously show that the economic record of Cardoso is the worst among all of the country's 24 chiefs of state". Under Cardoso, the external debt of the country has more than doubled, from $148.2 billion when he assumed office in 1994 to $400 billion today. This has its origins in the president's famous Plano Real, which pegged Brazil's currency to the dollar in an effort to flight inflation was well as attract foreign investment to Brazil. The strategy seemed to work in the first few years, with inflation brought under control and with total capital inflows more than doubling between 1994 and 1996. But as economist Geisa Maria Rocha shows in painful detail in a brilliant article in the latest issue of New Left Review, Cardoso's early triumphs were pyrrhic. The pegged currency quickly became overvalued as the dollar gained strength in the mid-1990s, resulting in the erosion of the competitiveness of Brazil's exports. In the context of the trade liberalization that was pursued simultaneously in accordance with neoliberal, free-market doctrine, the overvalued real triggered a flood of imports that produced a yawning trade deficit that needed more and more foreign capital to finance it. This meant higher and higher interest rates to attract foreign capital. When Brazil was "infected" in late 1997 by the Asian financial crisis, interest rates hit the roof-rising to 50 per cent in October 1998 as the government, with the International Monetary Fund's encouragement, sought to prevent foreign capital from leaving Brazil. Simultaneously, the authorities spent $50 billion defending the overvalued real from speculative attack before finally giving up the dollar peg and watching helplessly as the real quickly lost over two-fifths of its value against the dollar. It was downhill for the real from there. Recently, with foreign investors' fears of Lula's candidacy, renewed speculative pressure speculation has driven down the real to 4 four reales to one dollar, from 1:1 in 1994. The Underside of Globalization Cardoso's monetary policy was part of a bigger policy package aimed at globalizing Brazil's economy. Reinaldo Goncalves says that instead of pursuing a "discriminating process of relating to the world economy", Cardoso opened up uncritically and simultaneously in the key areas of finance, trade, technology, and investment. In all four areas, Brazil came out the loser. The situation in investment was paradigmatic. The liberalization of the foreign investment law and the privatization of state enterprises brought in $1.8 billion in net foreign direct investment in 1994 to $30 billion in 2000. The foreign investment boom put Brazil the country in sixth place among developing countries in terms of penetration by transnational corporations, with transnational corporations now accounting for 40 per cent of Brazilian exports. But what seemed a few years ago to be part of the solution has now become a major part of the problem, in the view of many Brazilians economic analysts. With so much of local production coming under the control of transnational corporations, control of decisions over national production has passed to the hands of enterprises that respond more to international conditions of profitability than to the needs of the local economy. Thus has emerged the great paradox of the Cardoso period: the dominance of foreign capital has not led to greater fixed capital investment, greater international competitiveness, and greater technological innovation. Indeed, UNCTAD Secretary General Rubens Ricupero claims the transnationalization of the Brazilian economy has been accompanied by deindustrialization. The massive entry of foreign capital has led, according to Geisa Maria Rocha, not to a strengthening of domestic capital in association with foreign capital but to its displacement. While certain sectors of finance capital and big industrial capital benefited from association with foreign capital, the greater part of the local industrial elite and medium and small industry that have serviced principally the domestic market have seen their fortunes sink. Enter Lula, who has cleverly captured the Brazilian industrial sector's discontent by using the high interest rates as a symbol of the dire state of the Brazilian industrial sector. As the campaign hits the homestretch, Lula constantly tells his audiences that it is time to lift a "blind" policy that foists 20 per cent interest rates that "strangle" the economy while benefiting only the few foreign and local interests that are the main prop of the Cardoso-Serra dispensation. Under Cardoso and the IMF's watchful eye, Serra is tongue-tied. Tight Space Yet inspite of the populist rhetoric, the Lula camp is cautious when asked about its short-term economic strategy. The reality of the crisis brought on by neoliberalism, Antonio Prado, the executive coordinator of the PT's electoral program, tells us, is that "there is little room for maneuver in the short-term". This means "we'll have to continue some of the current administration's policies like inflation targeting, the floating exchange rate, and raising the budget surplus in the first year". Indeed, the IMF has practically imprisoned the future Lula government by warning that the remaining $24 billion of the $30 billion emergency loan negotiated with the Fund in August will not be released unless government continues the stringent conditions agreed to by the Cardoso government. To prevent a massive capital flight that would destabilize the economy, Lula said he will live up to the conditions demanded by the IMF, just as earlier he had agreed to honor Brazil's foreign debt obligations. Given the prominence he has given to the interest rate issue, however, Lula will not be able to avoid taking a stab in this direction, even in the first year. Interestingly, the key initiative he plans to set in motion to achieve this is one that he shares with his rival Serra: an aggressive export program to trigger a rise in earnings that would allow interest rates to drop, enterprises to borrow, and investment to resume. This strategy out of the crisis is, the economist Goncalves points out, fraught with difficulties and dangers since not only have Brazil's industries lost competitiveness but the international economy is currently marked by deflation, recession, and overcapacity. Lula's Restless Base No major redistributive program is planned for the first year of a Lula government owing to the crisis and the simple lack of resources. The question is: will Lula's main base of workers and peasants cooperate? Public employees have not had their wages raised for eight years, and land reform is at a standstill. Prado of the Lula campaign says, "we are confident the workers' civic consciousness will prevail and they will agree with the government's gradualist approach". As for the countryside, it continues to be in ferment, with land occupations by the militant Movement of the Landless (MST) and other groups taking place even during the electoral period. Nevertheless, Lula's room for maneuver in the rural sector seems to be greater compared to the urban areas. Geraldo Fontes, an MST leader, claims Lula is favorable to an MST proposal for a short-term program in the countryside that has three elements: expropriation of all land that is now occupied, provision of people in the reformed areas with seeds, tools, and other basic needs, and food for the first three months. Threat from the North Lula's main problem in his first year may, in fact, not be internal actors but international ones. Foreign capital is likely to be skittish, watching for signals to head for the exit. The IMF will be watching the new economic program with eagle eyes, determined in particular to make the PT to live up to its promise to achieve a budget surplus of 3.75 per cent.of Gross Domestic Product (GDP). Then there is the United States and its pet project, the Free Trade for the Americas (FTAA). The PT might not be as resilient when it comes to the Free Trade Area of the Americas (FTAA), as it has been on the IMF loan and the foreign debt. Lula campaign adviser Prado, who is an economist, tells me that the current FTAA, as negotiated by the Cardoso government, is a "non- starter". Its provisions on investment, patents and trademarks, and government procurement are seen as particularly damaging to the PT's strategic economic program. With its investment program closely patterned after the current North American Free Trade Area-including something similar to NAFTA's Chapter 11, which allows TNC's to sue governments for discriminatory treatment-Prado sees the current FTAA as making it practically impossible for Brazil to pursue an industrial policy. Its provisions on government procurement would make it difficult for Brazil to carry out an import subsitution strategy by allowing the government to offer national industrialists preferential incentives to produce important industrial inputs. Its patent provisions would "endanger public health" by making it difficult to produce the necessary chemicals to make cheap medicines for people. "It is impossible to defend the FTAA before the Brazilian people under these conditions", he maintains. The PT is, of course, only expressing the overwhelming negative sentiment expressed by Brazilians in a recent unofficial referendum. Mindful of this resistance, US Trade Representative Robert Zoellick recently warned that Brazil's choice was either to trade with ALCA [the Spanish acronym for FTAA] or with Antarctica". This created an uproar in Brazil, which Lula, who had earlier characterized the FTAA as a "type of economic annexation of Latin America by the US", tried to defuse by saying, "We have a number of things to settle with Comrade Bush". Not surprisingly, this "lulism" made things worse. A clash with the United States might be eventually unavoidable on the FTAA, but with Washington preoccupied by the Middle East, Iraq, and the so-called war against terror, Lula, like Hugo Chavez in Venezuela, might, for the moment, be spared the full brunt of a US response. Keeping the US at bay, keeping the establishment divided, keeping his mass base in line as he and his team try to restart an economy in the throes of recession. Such is the magnitude of Lula's task in the next 12 months. "All new governments enjoy a honeymoon period with the Brazilian people", says Jacobson of CUT. Luis Inacio da Silva will need as long a honeymoon as he can possibly get from the Brazilian people and as little attention as possible from the United States. The Significance of the European Social Forum (6 November 2002)
The European Social Forum in Florence (Nov. 6-12) is taking place against the backdrop of a global capitalist system that is in serious crisis. What makes the current crisis particularly volatile and unique is the way that the crisis of overproduction or overcapacity that has preoccupied economic analysts as diverse as Joseph Schumpeter, Joan Robinson, and Ernest Mandel is intersecting with a crisis in the reproduction of the ideological and political processes that sustain the productive system.
Crisis of Overproduction Central to the current conjuncture is a crisis of overproduction and overcapacity that could portend more than an ordinary recession. Tied to an increasingly integrated global production system and market, the manufacturing sector of the word's lead economy saw its profits stop growing after 1997. By the end of the decade, practically all key industrial sectors in the US were suffering tremendous overcapacity globally, with the worst situation existing in the telecommunications sector, where only 2.5 per cent of the infrastructure layed down was being utilized. With manufacturing stagnant, it has been the dynamics of finance capitalism has driven the US economy over the past decade, but with the profitability of the financial sector being dependent on the underlying, actual profitability of the manufacturing sector, the finance-driven growth ultimately had to run out of steam. The loss of $7 billion dollar in paper wealth in the US stock market collapse that began in March 2000 represented the rude reassertion of the reality of a global economy crippled by overcapacity, overproduction, and lack of profitability. The US economy is part of a world economy that has become increasingly integrated so that overproduction is now a common synchronous deflationary crisis that is wrenching Europe, Japan, and East Asia. Globalization has eliminated previous situations wherein one country's growth could counter recessionary trends in another's. Crisis of Legitimacy Alongside and intersecting with the crisis of overproduction is a massive crisis of reproduction. There are three processes that are severely complicating the ability of the system to stably reproduce itself: the crisis of ideological legitimacy, the crisis of liberal democracy, and the crisis of overextension. The crisis of ideological legitimacy refers to the increasing inability of the neoliberal ideology that underpins today's global capitalism to persuade people of its necessity and viability as a system of production, exchange, and distribution. This crisis has enveloped mainly global capitalism's main institutions of economic governance—the World Bank, the International Monetary Fund, and the World Trade Organization—owing to the disastrous impact of their policies in the developing world. The crisis of liberal democracy stems from the popular perception in both the poor South and the rich North that representative democracies have become thoroughly perverted by money politics. In the United States, the feeling is rife that the world's oldest modern democracy has turned into a plutocracy. In Europe, there is also much concern over corporate control of political party finances, but even more threatening is the widespread sense that power has been hijacked from elected national parliaments by unelected, unaccountable Eurobodies like the European Commission. Overextension The fourth crisis might not be immediately discernible, but it is operative as well. The recent expansion of US military influence into Afghanistan, the Philippines, Central Asia, and South Asia may communicate strength. Yet, despite all this movement, the United States has not been able to consolidate victory anywhere, certainly not in Afghanistan, where anarchy, and not a stable pro-US regime, reigns. Uncertainty over the success of an invasion of Iraq continues to be felt at the Pentagon. The Iraq question has brought the Atlantic Alliance to its worst state since World War II. Latin America is exploding with political rebellions against neoliberal economics as Washington's attention is focused on the Middle East. All these are signs not so much of undisputed hegemony than of what Paul Kennedy called "imperial overstretch". Hope amidst Crisis These intersecting crises are unfolding even as the movement against anti-corporate globalization is gaining strength. The European Social Forum (ESF) is one of the latest incarnations of this movement, one directly inspired by the World Social Forum (WSF) held in Porto Alegre, Brazil over the last two years. The WSF and ESF might be said to perform three functions for a global community that is troubled, angry, and searching for alternatives. First, they represent a space—both physical and temporal—for this diverse movement to meet, to network, and quite simply, to feel and affirm itself. Second, they are a retreat during which the movement gathers its energies and charts the directions of its continuing drive to confront and roll back the processes, institutions, and structures of corporate-driven globalization. Third, they provide a site and a space for the movement to elaborate, discuss, and debate the vision, values, and institutions of an alternative economic and political order. As the crisis of global capitalism deepens, the WSF and ESF processes become all the more important. As the brilliant German thinker Rosa Luxemburg predicted, "barbarism" in the form of fascism, which reactionary elites made common cause with, nearly triumphed in the thirties and early forties. Today, corporate-driven globalization is creating so much of the same instability, resentment, and crisis that are the breeding ground of fascist, fanatical, and authoritarian populist forces. The forces representing human solidarity and community have no choice but to step in quickly to convince the disenchanted masses that indeed a better world is possible, for the alternative is, as in the 1930's, seeing the vacuum filled by terrorists, demagogues of the religious and secular right, and the purveyors of irrationality and nihilism. |